We propose a Dynamic Programming (DP) approach for pricing options embedded in bonds, the focus being on call and put options with advance notice. An efficient procedure is developed for the cases where the interest-rate process follows the Vasicek, Cox-Ingersoll-Ross (CIR), or generalized...

Pricing European-style Asian options based on the arithmetic average, under the Black and Scholes model, involves estimating an integral (a mathematical expectation) for which no easily computable analytical solution is available. Pricing their American-style counterparts, which provide early...

The fields of probability and statistics are built over the abstract concepts of probability space and random variable. This has given rise to elegant and powerful mathematical theory, but exact implementation of these concepts on conventional computers seems impossible. In practice, random...