Numerical Methods in Finance

Volume 12 of the series Springer Proceedings in Mathematics pp 215-255


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

  • Bruno BouchardAffiliated withCEREMADE and Crest-ENSAE, Université Paris-Dauphine
  • , Xavier WarinAffiliated withEDF R&D, Département Optimisation SImulation RIsques et Statistiques (OSIRIS)Laboratoire de Finance des Marchés de l’Energie (FiME), Université Paris Dauphine

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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.


Monte Carlo American option Malliavin Quantization Regression