Monte-Carlo valorisation of American options: facts and new algorithms to improve existing methods

Bruno Bouchard (1, 2) , Xavier Warin (3)

1 CEREMADE - CEntre de REcherches en MAthématiques de la DEcision
2 CREST - Centre de Recherche en Économie et Statistique
3 EDF - EDF

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 technics can be exploded with improved complexity and efficiency. We also discuss several technics for the estimation of the corresponding hedging strategies. Numerical tests and comparisons, including the quantization approach, are performed.

Mots clés: American options; Monte-carlo methods

Domaines: Probabilités [math.PR]

Bruno Bouchard, Xavier Warin. Monte-Carlo valorisation of American options: facts and new algorithms to improve existing methods. Proceedings in Mathematics, 2012, 12, pp.215-255. ⟨10.1007/978-3-642-25746-9⟩. ⟨hal-00486825⟩