We introduce a criterion how to price derivatives in incomplete markets, which is based on the theory of optimal strategies in repeated multiplicative games. Arguments are presented why such growth-optimal strategies should be relevant to the problem of pricing derivatives. Under the assumptions...

In this paper we present a method for calculating the entire hedge surface of a derivative who’s future underlying asset has been simulated by a market simulator for example with the Monte Carlo method. Our method is built from work on penalized filtering techniques and is applied on a grid of...

American Monte Carlo is a solution to the puzzle of calculating the value of derivatives with the right to an early exercise, when using Monte Carlo simulation. One of the technique uses regression of some suitable basis functions, which is a bit arbitrary, and could if made wrong render in...