Monte-Carlo methods for the pricing of American options: a semilinear BSDE point of view

Bouchard, Bruno; Chau, Ki Wai; Manai, Arij; Sid-Ali, Ahmed

doi:10.1051/proc/201965294

Cited by 3 publications

(1 citation statement)

References 10 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…For example, hybrid methods combine analytical and numerical approximations. Kim et al [5] used numerical methods, and Bouchard et al [6] used Monte Carlo simulations. More specifically, Chockalingam and Muthuraman [7] adopted an approximate moving boundary method.…”

Section: Introductionmentioning

confidence: 99%

On a Free Boundary Problem for American Options Under the Generalized Black–Scholes Model

Lee

2020

Mathematics

View full text Add to dashboard Cite

We consider the problem of pricing American options using the generalized Black–Scholes model. The generalized Black–Scholes model is a modified form of the standard Black–Scholes model with the effect of interest and consumption rates. In general, because the American option problem does not have an exact closed-form solution, some type of approximation is required. A simple numerical method for pricing American put options under the generalized Black–Scholes model is presented. The proposed method corresponds to a free boundary (also called an optimal exercise boundary) problem for a partial differential equation. We use a transformed function that has Lipschitz character near the optimal exercise boundary to determine the optimal exercise boundary. Numerical results indicating the performance of the proposed method are examined. Several numerical results are also presented that illustrate a comparison between our proposed method and others.

show abstract

Section: Introductionmentioning

confidence: 99%