Title: An Improved Least-Square Monte-Carlo Approach for Pricing American Options
Abstract: This article derives improvements to the LSMC for derivatives pricing. For single asset
pricing, the results imply that our method can even raise computational speed by 10% to 14%
more than that of Choi and Song (2008). We also extend our model for multi-asset pricing
and make a comparison with Anderson and Broadie’s (2004) approach in valuing rainbow
options. The benchmark values can be exactly covered in 95% confidence intervals and the
computational time is reduced by about 94%. Further, we use the Sobol’ sequence to reduce
99% computational time under 0.04%~0.9% pricing errors.
Publication Year: 2013
Publication Date: 2013-06-30
Language: en
Type: article
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