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...

In the Longstaff-Schwartz Least-Squares Monte Carlo (LSM) method for American option pricing, the early-exercise strategy is based on a regression of future option values on current state variables. The dependence between continuation values and future cash flows results in potential model...

When valuing American options with simulations and regressions, Rasmussen (2005) demonstrated that the variance-minimizing control variate is sampled at the recorded exercise time. The present article further discusses the application of optimal control variates in the context of the...