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2012 | OriginalPaper | Chapter

Monte-Carlo Valuation of American Options: Facts and New Algorithms to Improve Existing Methods

Authors : Bruno Bouchard, Xavier Warin

Published in: Numerical Methods in Finance

Publisher: Springer Berlin Heidelberg

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Abstract

The aim of this paper is to discuss efficient algorithms for the pricing of American options by two recently proposed Monte-Carlo type methods, namely the Malliavian calculus and the regression based approaches. We explain how both techniques can be exploited with improved complexity and efficiency. We also discuss several techniques for the estimation of the corresponding hedging strategies. Numerical tests and comparisons, including the quantization approach, are performed.

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previous chapter Optimal Delaunay and Voronoi Quantization Schemes for Pricing American Style Options

next chapter Least-Squares Monte Carlo for Backward SDEs

Hereafter, we say that a point x _j dominates a point x _k if x _j ⁱ > x _k ⁱ for all i ≤ d.

For all the computations, we use a core i7 2,9 GHz processor.

Here and below, the number of points corresponds to the sum of the numbers of points used at each time step. There are distributed according to [4]

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Title: Monte-Carlo Valuation of American Options: Facts and New Algorithms to Improve Existing Methods
Authors: Bruno Bouchard
Xavier Warin
Publisher: Springer Berlin Heidelberg
Book: Numerical Methods in Finance
Print ISBN: 978-3-642-25745-2

Electronic ISBN: 978-3-642-25746-9

Copyright Year: 2012
DOI: https://doi.org/10.1007/978-3-642-25746-9_7

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