Pricing High-Dimensional American Options Using Local Consistency Conditions
نویسندگان
چکیده
منابع مشابه
An irregular grid approach for pricing high-dimensional American options ?
We propose and test a new method for pricing American options in a high-dimensional setting. The method is centred around the approximation of the associated complementarity problem on an irregular grid. We approximate the partial differential operator on this grid by appealing to the SDE representation of the underlying process and computing the root of the transition probability matrix of an ...
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URL: www.thejournalofcomputationalfinance.com High-dimensional problems frequently arise in the pricing of derivative securities – for example, in pricing options on multiple underlying assets and in pricing term structure derivatives. American versions of these options, ie, where the owner has the right to exercise early, are particularly challenging to price. We introduce a stochastic mesh me...
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This paper considers the problem of pricing options with early-exercise features whose payoff depends on several sources of uncertainty. We propose a stochastic grid method for estimating the upper and lower bound values of high-dimensional American options. The method is a hybrid of the least squares method of Longstaff and Schwartz (2001) [22], the stochastic mesh method of Broadie and Glasse...
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American options are financial contracts that allow exercise at any time until expiration. While the pricing of standard American option contracts has been well researched, with a few exceptions no analytical solutions exist. Valuation of more involved American option contracts, which include multiple underlying assets or pathdependent payoff, is still to a high degree an uncharted area. Most n...
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ژورنال
عنوان ژورنال: SSRN Electronic Journal
سال: 2004
ISSN: 1556-5068
DOI: 10.2139/ssrn.557745