Please use this identifier to cite or link to this item:
Belomestny, Denis
Milstein, Grigori N.
Spokoiny, Vladimir
Year of Publication: 
Series/Report no.: 
SFB 649 discussion paper 2006,051
Here we develop methods for efficient pricing multidimensional discrete time American and Bermudan options by using regression based algorithms together with a new approach towards constructing upper bounds for the price of the option. Applying the sample space with payoffs at the optimal stopping times, we propose sequential estimates for continuation values, values of the consumption process, and stopping times on the sample paths. The approach admits constructing both low and upper bounds for the price by Monte Carlo simulations. The methods are illustrated by pricing Bermudan swaptions and snowballs in the Libor market model.
American and Bermudan options
Low and Upper bounds
Monte Carlo simulations
Consumption process
Regression methods
Optimal stopping times
Document Type: 
Working Paper

Files in This Item:
514.12 kB

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.