Monte-Carlo Valuation of American Options: Facts and New Algorithms to Improve Existing Methods

  • Bruno Bouchard
  • Xavier Warin
Conference paper

DOI: 10.1007/978-3-642-25746-9_7

Volume 12 of the book series Springer Proceedings in Mathematics (PROM)
Cite this paper as:
Bouchard B., Warin X. (2012) Monte-Carlo Valuation of American Options: Facts and New Algorithms to Improve Existing Methods. In: Carmona R., Del Moral P., Hu P., Oudjane N. (eds) Numerical Methods in Finance. Springer Proceedings in Mathematics, vol 12. Springer, Berlin, Heidelberg

Abstract

The aim of this paper is to discuss efficient algorithms for the pricing of American options by two recently proposed Monte-Carlo type methods, namely the Malliavian calculus and the regression based approaches. We explain how both techniques can be exploited with improved complexity and efficiency. We also discuss several techniques for the estimation of the corresponding hedging strategies. Numerical tests and comparisons, including the quantization approach, are performed.

Keywords

Monte CarloAmerican optionMalliavinQuantizationRegression

Copyright information

© Springer-Verlag Berlin Heidelberg 2012

Authors and Affiliations

  • Bruno Bouchard
    • 1
  • Xavier Warin
    • 2
    • 3
  1. 1.CEREMADE and Crest-ENSAEUniversité Paris-DauphineParis Cedex 16France
  2. 2.EDF R&D, Département Optimisation SImulation RIsques et Statistiques (OSIRIS)ClamartFrance
  3. 3.Laboratoire de Finance des Marchés de l’Energie (FiME)Université Paris DauphineParisFrance