Although Bermudan options are routinely priced by simulation and least-squares methods using lower and dual upper bounds, the latter are hardly optimized. In this paper, we optimize recursive upper bounds, which are more tractable than the original/nonrecursive ones, and derive two new results:...

This paper explains the losses (or errors) associated with pricing an American option in a multi-factor setting when using the true model but a suboptimal exercise strategy as a barrier option (a calibrated misspecified model, e.g., Black-Scholes). Pricing American options in a multi-factor...

Least-squares methods enable us to price Bermudan-style options by Monte Carlo simulation. They are based on estimating the option continuation value by least squares. We show that the Bermudan price is maximized when this continuation value is estimated near the exercise boundary, which is...