Pricing Higher-Dimensional American Options Using The Stochastic Grid Method
This paper considers the problem of pricing options with early-exercise features whose payo depends on several sources of uncertainty. We propose a stochastic grid method for estimating the upper and lower bound values of high-dimensional American options. The method is a hybrid of the least squares method of Longsta and Schwartz (2001) , the stochastic mesh method of Broadie and Glasserman (2004) , and stratified state aggregation along the pay-off method of Barraquand and Martineau (1995) . Numerical results are given for single asset Bermudan options, Bermudan max options, Bermudan options on the arithmetic mean of a collection of stocks.
|THEME||Life Sciences (theme 5), Energy (theme 4)|
|Series||CWI. Department of Modelling, Analysis and Computing [MAC]|
Jain, S, & Oosterlee, C.W. (2010). Pricing Higher-Dimensional American Options Using The Stochastic Grid Method. CWI. Department of Modelling, Analysis and Computing [MAC]. CWI.