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In this paper we develop several regression algorithms for solving general stochastic optimal control problems via Monte Carlo. This type of algorithms is particularly useful for problems with a highdimensional state space and complex dependence structure of the underlying Markov process with...
Persistent link: https://www.econbiz.de/10005041089
We present two approximation methods for the pricing of CMS spread options in Libor market models. Both approaches are based on approximating the underlying swap rates with lognormal processes under suitable measures. The first method is derived straightforwardly from the Libor market model. The...
Persistent link: https://www.econbiz.de/10008487384
Persistent link: https://www.econbiz.de/10008860424
In this paper we develop several regression algorithms for solving general stochastic optimal control problems via Monte Carlo. This type of algorithms is particularly useful for problems with a highdimensional state space and complex dependence structure of the underlying Markov process with...
Persistent link: https://www.econbiz.de/10003835132
Persistent link: https://www.econbiz.de/10003809706
We present two approximation methods for the pricing of CMS spread options in Libor market models. Both approaches are based on approximating the underlying swap rates with lognormal processes under suitable measures. The first method is derived straightforwardly from the Libor market model. The...
Persistent link: https://www.econbiz.de/10013142497
Kolodko and Schoenmakers (2006) and Bender and Schoenmakers (2006) introduced a policy iteration that allows the achievement of a tight lower approximations of the price for early exercise options via a nested Monte Carlo simulation in a Markovian setting. In this paper we enhance the algorithm...
Persistent link: https://www.econbiz.de/10005462637
In this paper we introduce efficient Monte Carlo estimators for the valuation of high-dimensional derivatives and their sensitivities (''Greeks''). These estimators are based on an analytical, usually approximative representation of the underlying density. We study approximative densities...
Persistent link: https://www.econbiz.de/10005083946
We present an iterative procedure for computing the optimal Bermudan stopping time, hence the Bermudan Snell envelope. The method produces an increasing sequence of approximations of the Snell envelope from below, which coincide with the Snell envelope after finitely many steps. Then, by...
Persistent link: https://www.econbiz.de/10005613407
Persistent link: https://www.econbiz.de/10008222878