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Monte Carlo methods for pricing and hedging American options

Please always quote using this URN:urn:nbn:de:0296-matheon-634
  • We introduce a new Monte Carlo method for constructing the exercise boundary of an American option in a generalized Black-Scholes framework. Based on a known exercise boundary, it is shown how to price and hedge the American option by Monte Carlo simulation of suitable probabilistic represen- tations in connection with the respective parabolic boundary value problem. The methods presented are supported by numerical simulation experiments.

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Metadaten
Author:G.N. Milstein, Oliver Reiß, John Schoenmakers
URN:urn:nbn:de:0296-matheon-634
Referee:Anton Bovier
Document Type:Preprint, Research Center Matheon
Language:English
Date of first Publication:2004/01/28
Release Date:2004/01/28
Institute:Weierstraß-Institut für Angewandte Analysis und Stochastik (WIAS)
Preprint Number:51
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