Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/25119
Authors: 
Belomestny, Denis
Milstein, Grigori N.
Year of Publication: 
2006
Series/Report no.: 
SFB 649 discussion paper 2006,038
Abstract: 
Here we develop an approach for efficient pricing discrete-time American and Bermudan options which employs the fact that such options are equivalent to the European ones with a consumption, combined with analysis of the market model over a small number of steps ahead. This approach allows constructing both upper and low bounds for the true price by Monte Carlo simulations. An adaptive choice of local low bounds and use of the kernel interpolation technique enhance efficiency of the whole procedure, which is supported by numerical experiments.
Document Type: 
Working Paper

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