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Computing the Lower and Upper Bound Prices for Multi-asset Bermudan Options via Parallel Monte Carlo Simulations

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Abstract

We present our work on computing the lower and upper bound prices for multi-asset Bermudan options. For the lower bound price we follow the Longstaff-Schwartz least-square Monte Carlo method. For the upper bound price we follow the Andersen-Broadie duality-based nested simulation procedure. For case studies we computed the prices of Bermudan max-call options and Bermudan interest rate swaptions. The pricing procedures are parallelized through POSIX multi-threading. Times required by the procedures on ×86 multi-core processors are much shortened than those reported in previous work.

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Notes

  1. 1.

    We use the subscript i for t i . So \( {\mathbf{S}}_{i} \) is actually \( {\mathbf{S}}_{{t_{i} }} \).

  2. 2.

    These are not their indexes in the whole N R simulated paths.

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Acknowledgments

Research is partially funded by ESFA (VP1-3.2-ŠMM-01-K-02-002).

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Authors and Affiliations

  1. Department of Computer Science and Software Engineering, Xi’an Jiaotong-Liverpool University, Suzhou, China

    Nan Zhang & Ka Lok Man

  2. Informatics Faculty, Vytautas Magnus University, Kaunas, Lithuania

    Tomas Krilavičius

  3. Baltic Institute of Advanced Technology, Vilnius, Lithuania

    Tomas Krilavičius

Authors
  1. Nan Zhang
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  2. Ka Lok Man
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  3. Tomas Krilavičius
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Corresponding author

Correspondence to Ka Lok Man .

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Editors and Affiliations

  1. Multimedia Engineering College of Engioneering, Mokpo National University, Chonnam, Korea, Republic of (South Korea)

    Gi-Chul Yang

  2. Unit 1, 1/F, Hung To Road, IAENG Secretariat, International Association of Engine, Hong Kong, Hong Kong SAR

    Sio-Iong Ao

  3. Faculty of Information Sciences and Engineering, University of Canberra, Canberra, Aust Capital Terr, Australia

    Xu Huang

  4. Calzada Tecnologico s/n, Instituto Tecnologico de Tijuana, Tijuana, Baja California, Mexico

    Oscar Castillo

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Zhang, N., Man, K.L., Krilavičius, T. (2015). Computing the Lower and Upper Bound Prices for Multi-asset Bermudan Options via Parallel Monte Carlo Simulations. In: Yang, GC., Ao, SI., Huang, X., Castillo, O. (eds) Transactions on Engineering Technologies. Springer, Dordrecht. https://doi.org/10.1007/978-94-017-9588-3_14

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  • DOI: https://doi.org/10.1007/978-94-017-9588-3_14

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  • Publisher Name: Springer, Dordrecht

  • Print ISBN: 978-94-017-9587-6

  • Online ISBN: 978-94-017-9588-3

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