Monte-Carlo valuation of American options: facts and new algorithms to improve existing methods

Bouchard, Bruno; Warin, Xavier

Bouchard, Bruno; Warin, Xavier (2012), Monte-Carlo valuation of American options: facts and new algorithms to improve existing methods, in Oudjane, Nadia, Numerical Methods in Finance, Springer : Berlin Heidelberg, p. 215-255. 10.1007/978-3-642-25746-9_7

Type

Chapitre d'ouvrage

External document link

https://hal.archives-ouvertes.fr/hal-00486825

Date

2012

Book title

Numerical Methods in Finance

Book author

Oudjane, Nadia

Publisher

Springer

Published in

Berlin Heidelberg

ISBN

978-3-642-25745-2

Pages

215-255

Abstract (EN)

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 technics can be exploded with improved complexity and efficiency. We also discuss several technics for the estimation of the corresponding hedging strategies. Numerical tests and comparisons, including the quantization approach, are performed.

Subjects / Keywords

American options; Monte-carlo methods

JEL

C15 - Statistical Simulation Methods: General
G12 - Asset Pricing; Trading Volume; Bond Interest Rates