TY - GEN A1 - Belomestny, Denis A1 - Schoenmakers, John T1 - Multilevel dual approach for pricing American style derivatives N2 - In this article we propose a novel approach to reduce the computational complexity of the dual method for pricing American options. We consider a sequence of martingales that converges to a given target martingale and decompose the original dual representation into a sum of representations that correspond to di� erent levels of approximation to the target martingale. By next replacing in each representation true conditional expectations with their Monte Carlo estimates, we arrive at what one may call a multilevel dual Monte Carlo algorithm. The analysis of this algorithm reveals that the computational complexity of getting the corresponding target upper bound, due to the target martingale, can be signi� cantly reduced. In particular, it turns out that using our new approach, we may construct a multilevel version of the well-known nested Monte Carlo algorithm of Andersen and Broadie (2004) that is, regarding complexity, virtually equivalent to a non-nested algorithm. The performance of this multilevel algorithm is illustrated by a numerical example. Y1 - 2012 UR - https://opus4.kobv.de/opus4-matheon/frontdoor/index/index/docId/1017 UR - https://nbn-resolving.org/urn:nbn:de:0296-matheon-10176 ER -