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.
Author: | G.N. Milstein, Oliver Reiß, John Schoenmakers |
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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 |