
Explanation:
When using antithetic variables, the variance of the estimator with total samples (which forms pairs) becomes , where is the correlation between the antithetic pairs. The new standard error is proportional to . Given , the ratio of the new standard error to the original is: . The percentage change is therefore .
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Q.12 The estimated standard error for a Monte Carlo simulation without antithetic variables is 3.65. The antithetic variables are now included so that the correlation between the pairs is -0.65 and the simulation is repeated 100 times. What is the percentage change in standard error?
A
45.65%
B
-46.45%
C
40.84%
D
-40.84%
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