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Regression methods in pricing American and Bermudan options using consumption processes

[Zeitschriftenartikel]

Belomestny, Denis; Spokoiny, Vladimir; Milstein, Grigori

Zitationshinweis

Bitte beziehen Sie sich beim Zitieren dieses Dokumentes immer auf folgenden Persistent Identifier (PID):http://nbn-resolving.de/urn:nbn:de:0168-ssoar-221242

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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 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.
Klassifikation Finanzwirtschaft, Rechnungswesen; Wirtschaftsstatistik, Ökonometrie, Wirtschaftsinformatik
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 http://dx.doi.org/10.1080/14697680802165736
Status Postprint; begutachtet (peer reviewed)
Lizenz PEER Licence Agreement (applicable only to documents from PEER project)
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