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Regression methods in pricing American and Bermudan options using consumption processes
[Zeitschriftenartikel]
Abstract Numerical algorithms for efficient pricing multidimensional discrete-time American and Bermudan options are constructed using regression methods and a new approach for computing upper bounds of the options' price. Using the sample space with payoffs at the optimal stopping times, we propose
sequenti... mehr
Numerical algorithms for efficient pricing multidimensional discrete-time American and Bermudan options are constructed using regression methods and a new approach for computing upper bounds of the options' price. Using the sample space with payoffs at the optimal stopping times, we propose
sequential estimates for continuation values, values of the consumption process, and stopping times on the sample paths. The approach allows constructing both lower and upper bounds for the price by Monte Carlo simulations. The algorithms are tested by pricing Bermudan max-calls and swaptions in the Libor market model.... weniger
Klassifikation
Wirtschaftsstatistik, Ökonometrie, Wirtschaftsinformatik
Finanzwirtschaft, Rechnungswesen
Methode
Theorieanwendung
Freie Schlagwörter
American and Bermudan options; Error bounds; Monte Carlo; Consumption process; Regression methods; Optimal stopping times
Sprache Dokument
Englisch
Publikationsjahr
2009
Seitenangabe
S. 315-327
Zeitschriftentitel
Quantitative Finance, 9 (2009) 3
DOI
https://doi.org/10.1080/14697680802165736
Status
Postprint; begutachtet (peer reviewed)
Lizenz
PEER Licence Agreement (applicable only to documents from PEER project)