We present the Forest of Stochastic Trees (FOST) method for pricing multiple exercise options by simulation. The proposed method uses stochastic trees in place of binomial trees in the Forest of Trees algorithm originally proposed to value swing options, hence extending that method to allow for...

This paper proposes a new method for pricing American options that uses importance sampling to reduce estimator bias and variance in simulation-and-regression based methods. Our suggested method uses regressions under the importance measure directly, instead of under the nominal measure as is...

Recently it was shown that the estimated American call prices obtained with regression and simulation based methods can be significantly improved on by using put-call symmetry. This paper extends these results and demonstrates that it is also possible to significantly reduce the variance of the...

In Canada, financial advisors and dealers are required by provincial securities commissions and self-regulatory organizations-charged with direct regulation over investment dealers and mutual fund dealers-to respectively collect and maintain know your client (KYC) information, such as their age...

Financial advisors use questionnaires and discussions with clients to determine a suitable portfolio of assets that will allow clients to reach their investment objectives. Financial institutions assign risk ratings to each security they offer, and those ratings are used to guide clients and...

This paper examines the efficiency of standard variance reduction techniques across option characteristics when pricing American-style call and put options with the Least-Squares Monte Carlo algorithm of Longstaff & Schwartz (2001). Our numerical experiments evaluate the efficiency of antithetic...

This paper develops and calibrates a structural model of contingent capital. The model can be calibrated to specific institutions and used to provide quantitative guidance on important practical issues. For instance this paper appears to be the first to consider the problem of empirically...

We consider the valuation and analysis of zero-coupon contingent capital bonds (CCBs) in the structural framework. Using Doob's Optional Sampling Theorem (and making virtually no assumptions on asset value dynamics, the terms of conversion or the conversion trigger) we express the value of the...

The Least-Squares Monte Carlo (LSM) algorithm of Longstaff and Schwartz (2001) prices American options with a regression-based early-exercise strategy. This paper analyzes LSM estimator variance to identify two sources: sampling design and stopping time estimation. We examine the effect of...