English, Article edition: MONTE CARLO EVALUATION OF AMERICAN OPTIONS USING CONSUMPTION PROCESSES DENIS BELOMESTNY; GRIGORI N. MILSTEIN

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Bookmark: http://trove.nla.gov.au/version/83069
Physical Description
  • article
Language
  • English

Edition details

Title
  • MONTE CARLO EVALUATION OF AMERICAN OPTIONS USING CONSUMPTION PROCESSES
Author
  • DENIS BELOMESTNY
  • GRIGORI N. MILSTEIN
Physical Description
  • article
Notes
  • We develop a new approach for pricing both continuous-time and discrete-time American options which is based on the fact that any American option is equivalent to a European one with a consumption process involved. This approach admits the construction of an upper bound (a lower bound) on the true price using some lower bound (an upper bound) by Monte Carlo simulation. A number of effective estimators of upper and lower bounds with the reduced variance are proposed. The method is supported by numerical experiments which look promising.
  • American and Bermudan options, lower and upper bounds, Monte Carlo simulation, variance reduction
  • RePEc:wsi:ijtafx:v:09:y:2006:i:04:p:455-481
Language
  • English
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