English, Article edition: LOCALIZED MONTE CARLO ALGORITHM TO COMPUTE PRICES OF PATH DEPENDENT OPTIONS ON TREES SEBASTIAN E. FERRANDO; ARIEL J. BERNAL

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Bookmark: http://trove.nla.gov.au/version/82811
Physical Description
  • article
Language
  • English

Edition details

Title
  • LOCALIZED MONTE CARLO ALGORITHM TO COMPUTE PRICES OF PATH DEPENDENT OPTIONS ON TREES
Author
  • SEBASTIAN E. FERRANDO
  • ARIEL J. BERNAL
Physical Description
  • article
Notes
  • A new simulation based algorithm to approximate prices of path dependent European options is introduced. The algorithm is defined for tree-like approximations to the underlying process and makes extensive use of structural properties of the discrete approximation. We indicate the advantages of the new algorithm in comparison to standard Monte Carlo algorithms. In particular, we prove a probabilistic error bound that compares the quality of both approximations. The algorithm is of general applicability and, for a large class of options, it has the same computational complexity as Monte Carlo.
  • Exotic options, Monte Carlo, binomial trees
  • RePEc:wsi:ijtafx:v:08:y:2005:i:05:p:553-574
Language
  • English
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