scholarly journals Monte Carlo Simulation for American Options

2004 ◽  
pp. 1-16 ◽  
Author(s):  
Russel E. Caflisch ◽  
Suneal Chaudhary
Keyword(s):  
Monte Carlo Simulation ◽  
Monte Carlo ◽  
American Options

A NEW MONTE CARLO METHOD FOR AMERICAN OPTIONS

2004 ◽  
Vol 07 (05) ◽  
pp. 591-614 ◽  
Author(s):  
G. N. MILSTEIN ◽  
O. REIß ◽  
J. SCHOENMAKERS
Keyword(s):  
Monte Carlo Simulation ◽  
Monte Carlo ◽  
Monte Carlo Method ◽  
Boundary Value Problem ◽  
Numerical Experiments ◽  
American Options ◽  
American Option ◽  
Parabolic Boundary ◽  
Black Scholes ◽  
Exercise Boundary

We introduce a new Monte Carlo method for constructing the exercise boundary of an American option in a generalized Black–Scholes framework. Based on a known exercise boundary, it is shown how to price and hedge the American option by Monte Carlo simulation of suitable probabilistic representations in connection with the respective parabolic boundary value problem. The method presented is supported by numerical experiments.

Monte Carlo Valuation of American Options through Computation of the Optimal Exercise Frontier

2004 ◽  
Vol 39 (2) ◽  
pp. 253-275 ◽  
Author(s):  
Alfredo Ibáñez ◽  
Fernando Zapatero
Keyword(s):  
Monte Carlo Simulation ◽  
Monte Carlo ◽  
Fixed Point ◽  
Finite Number ◽  
Single Point ◽  
American Options ◽  
Simple Algorithm ◽  
Simulation Method ◽  
Monte Carlo Simulation Method ◽  
Bermudan Options

AbstractThis paper introduces a Monte Carlo simulation method for pricing multidimensional American options based on the computation of the optimal exercise frontier. We consider Bermudan options that can be exercised at a finite number of times and compute the optimal exercise frontier recursively. We show that for every date of possible exercise, any single point of the optimal exercise frontier is a fixed point of a simple algorithm. Once the frontier is computed, we use plain vanilla Monte Carlo simulation to price the option and obtain a low-biased estimator. We illustrate the method with applications to several types of options.

Pricing American options: a comparison of Monte Carlo simulation approaches

2001 ◽  
Vol 4 (3) ◽  
pp. 39-88 ◽  
Author(s):  
Michael Fu ◽  
Scott Laprise ◽  
Dilip Madan ◽  
Yi Su ◽  
Rongwen Wu
Keyword(s):  
Monte Carlo Simulation ◽  
Monte Carlo ◽  
American Options

MONTE CARLO EVALUATION OF AMERICAN OPTIONS USING CONSUMPTION PROCESSES

2006 ◽  
Vol 09 (04) ◽  
pp. 455-481 ◽  
Author(s):  
DENIS BELOMESTNY ◽  
GRIGORI N. MILSTEIN
Keyword(s):  
Monte Carlo Simulation ◽  
Monte Carlo ◽  
Lower Bound ◽  
Upper Bound ◽  
Continuous Time ◽  
Numerical Experiments ◽  
American Options ◽  
Upper And Lower Bounds ◽  
New Approach ◽  
Monte Carlo Evaluation

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.

scholarly journals Pricing 50ETF in the Way of American Options Based on Least Squares Monte Carlo Simulation

2016 ◽  
Vol 2 (2) ◽  
pp. 71
Author(s):  
Shuai Gao ◽  
Jun Zhao
Keyword(s):  
Monte Carlo Simulation ◽  
Monte Carlo ◽  
Stock Market ◽  
Least Squares ◽  
American Options ◽  
Chinese Stock Market ◽  
Least Squares Monte Carlo ◽  
Matlab Program ◽  
S Model ◽  
The Way

50ETF appears on the Chinese stock market on 9th February,2015, the contracts are European Options and the options are priced by B-S model.50ETF is the only one option that can be traded, there are no American Options in Chinese stock market. This paper studies 50ETF pricing analysis in accordance with the way of American Option. We use Least Squares Monte Carlo Simulation to price 50ETF and analyze them, give the numerical results by matlab program. This issue is worth studying, because the paper studies 50ETF, and price it in the way of American Options, we try to employ Monte Carlo Simulation to solve this problem in china and the results of the paper can enrich the option products in the stock market of China.

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