Sydney Financial Mathematics Workshop
Sponsored by
National Australia Bank
Monte Carlo Valuation of American Options
Malcolm Gordon, Christian Killin & James Yardley
(Quantitative Analysis Group St George Bank) and
Pavel Shevchenko (CSIRO Mathematical and Information Sciences)
| Time: | 5:15--7:00 pm |
| Date: | Tuesday 22nd February 2000 |
| Venue: | VIP Room, Bay-8, Australia Technology Park |
Abstract
This talk will provide a review of three approaches to valuing American
options using Monte Carlo methods. The talk will be in four sections:
-
A brief review of the mathematical issues relating to pricing American options.
-
Valuation through computation of the optimal exercise frontier [1].
-
The least squares approach of Longstaff and Schwartz [2].
-
The stochastic mesh approach of Broadie and Glasserman [3].
References
-
Abanez A. and Zapatero, F. 'Monte Carlo Valuation of American
Options Through Computation of the Optimal Exercise Frontier' 1999.
(available here)
-
Longstaff, F and Schwartz, E. S. 'Valuing American Options by
Simulation: A Simple Least squares Approach', working paper, UCLA.
-
Broadie, M. and Glasserman, P. 'Pricing American-style securities
using simulation' Journal of Economic Dynamics & Control 21 (1997) 1323-1352.
Please feel free to bring this to the attention of interested colleagues.