This paper introduces and illustrates a new version of the Monte Carlo method that has attractive properties for the numerical valuation of derivatives. The traditional Monte Carlo method has proven to be a powerful and flexible tool for many types of derivatives calculations. Under the...

We present an integral equation approach for the valuation of American-style derivatives when the underlying asset price follows a general diffusion process and the interest rate is stochastic. Our contribution is fourfold. First, we show that the exercise region is determined by a single...

Quasi-Monte Carlo (QMC) methods are important numerical tools in the pricing and hedging of complex financial instruments. The effectiveness of QMC methods crucially depends on the discontinuity and the dimension of the problem. This paper shows how the two fundamental limitations can be...