Showing 1 - 10 of 47
Persistent link: https://www.econbiz.de/10010109464
We introduce a set of improvements which allow the calculation of very tight lower bounds for Bermudan derivatives using Monte Carlo simulation. These lower bounds can be computed quickly, and with minimal hand-crafting. Our focus is on accelerating policy iteration to the point where it can be...
Persistent link: https://www.econbiz.de/10012710849
We investigate the pricing performance of eight trinomial trees and one binomial tree, which was found to be most effective in an earlier study, under 20 different implementation methodologies for pricing American put options. We conclude that the binomial tree, the Tian third‐order...
Persistent link: https://www.econbiz.de/10011197668
We study the simulation of range accrual coupons when valuing callable range accruals in the displaced-diffusion LIBOR market model (DDLMM). We introduce a number of new improvements that lead to significant efficiency improvements, and explain how to apply the adjoint-improved pathwise method...
Persistent link: https://www.econbiz.de/10010883212
We present a new non-nested approach for computing additive upper bounds for callable derivatives using Monte Carlo simulation. It relies on the regression of Greeks computed using adjoint methods. We also show that it is possible to early terminate paths once points of optimal exercise have...
Persistent link: https://www.econbiz.de/10010744190
We introduce two new methods to calculate bounds for zero-sum game options using Monte Carlo simulation. These extend and generalize upper-bound duality results to the case where both parties of a contract have Bermudan optionality. It is shown that the primal-dual simulation method can still be...
Persistent link: https://www.econbiz.de/10009197917
We develop new Monte Carlo techniques based on stratifying the stock's hitting-times to the barrier for the pricing and Delta calculations of discretely-monitored barrier options using the Black-Scholes model. We include a new algorithm for sampling an Inverse Gaussian random variable such that...
Persistent link: https://www.econbiz.de/10008461844
Persistent link: https://www.econbiz.de/10009014343
Persistent link: https://www.econbiz.de/10008277001