Monte-Carlo methods for the pricing of American options: a semilinear BSDE point of view
We extend the viscosity solution characterization proved in  for call/put American option prices to the case of a general payoff function in a multi-dimensional setting: the price satisfies a semilinear re-action/diffusion type equation. Based on this, we propose two new numerical schemes inspired by the branching processes based algorithm of . Our numerical experiments show that approximating the discontinu-ous driver of the associated reaction/diffusion PDE by local polynomials is not efficient, while a simple randomization procedure provides very good results.
|Series||arXiv.org e-Print archive|
Bouchard, B, Chau, K.W, Manai, A, & Sid-Ali, A. (2017). Monte-Carlo methods for the pricing of American options: a semilinear BSDE point of view. arXiv.org e-Print archive.