Number of paths versus number of basis functions in American option pricing

Number of Paths versus Number of Basis Functions in American Option Pricing

An American option grants the holder the right to select the time at which to exercise the option, so pricing an American option entails solving an optimal stopping problem. Difficulties in applying standard numerical methods to complex pricing problems have motivated the development of techniques that combine Monte Carlo simulation with dynamic programming. One class of methods approximates th...

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Number of Paths versus Number of Basis Functions in American Option Pricing1 by Paul Glasserman

An American option grants the holder the right to select the time at which to exercise the option, so pricing an American option entails solving an optimal stopping problem. Difficulties in applying standard numerical methods to complex pricing problems have motivated the development of techniques that combine Monte Carlo simulation with dynamic programming. One class of methods approximates th...

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Decision, Risk and Operations Working Papers Series Number of Paths Versus Number of Basis Functions in American Option Pricing

An American option grants the holder the right to select the time at which to exercise the option, so pricing an American option entails solving an optimal stopping problem. Difficulties in applying standard numerical methods to complex pricing problems have motivated the development of techniques that combine Monte Carlo simulation with dynamic programming. One class of methods approximates th...

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Option Pricing using Radial Basis Functions

In this paper, we have implemented a radial basis function (RBF) based method for solving the Black–Scholes partial differential equation. The application we have chosen is the valuation of European call options based on several underlying assets. We have shown that by appropriate choices of the RBF shape parameter and the node point placement, the accuracy of the results can be improved by at ...

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Positive Coupling Effect in Gas Condensate Flow Capillary Number Versus Weber Number

Positive coupling effect in gas condensate reservoirs is assessed through a pure theoretical approach. A combination of linear stability analysis and long bubble approximation is applied to describe gas condensate coupled flow and relative permeability, thereof. The role of capillary number in gas condensate flow is clearly expressed through closed formula for relative permeability. While the m...

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Number of paths versus number of basis functions in American option pricing

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