Binomial Method in Bermudan Option

Stochastic Kriging for Bermudan Option Pricing

We investigate three new strategies for the numerical solution of optimal stopping problems within the Regression Monte Carlo (RMC) framework of Longstaff and Schwartz. First, we propose the use of stochastic kriging (Gaussian process) meta-models for fitting the continuation value. Kriging offers a flexible, nonparametric regression approach that quantifies approximation quality. Second, we co...

An Improved Binomial Lattice Method for Multi-Dimensional Option Problems

We propose an improved binomial lattice approach for valuing complex option problems whose payoff depends on multiple state variables following correlated geometric Brownian processes. The proposed approach relies on two main ideas: a specific change of time scale as in the log-trasformed binomial approach by Trigeorgis (1991), and a change of basis of the asset span, to trasform them into unco...

A Dynamic Portfolio of American Option Using Fuzzy Binomial Method

A Dynamic Portfolio or Dynamic Asset Allocation is a strategy used to determine the proportion of a number of assets, chosen carefully, in order to achieve optimum performance of the portfolio. In this paper, the portfolio consists only Options traded in the financial market. One of the most famous models of option pricing is Binomial Cox-Ross-Rubinstein (CRR) Model. Using Fuzzy Binomial CRR pr...

Numeraire-invariant Option Pricing & American, Bermudan, and Trigger Stream Rollover

Part I proposes a numeraire-invariant option pricing framework. It defines an option, its price process, and such notions as option indistinguishability and equivalence, domination, payoff process, trigger option, and semipositive option. It develops some of their basic properties, including price transitivity law, indistinguishability results, convergence results, and, in relation to nonnegati...

Importance Resampling with MRAS algorithm for Bermudan option pricing