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Optimal quantization for the pricing of swing options

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  • Olivier Aj Bardou

    (GDF-RDD)

  • Sandrine Bouthemy

    (GDF-RDD)

  • Gilles Pag\`es

    (PMA)

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    Abstract

    In this paper, we investigate a numerical algorithm for the pricing of swing options, relying on the so-called optimal quantization method. The numerical procedure is described in details and numerous simulations are provided to assert its efficiency. In particular, we carry out a comparison with the Longstaff-Schwartz algorithm.

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    File URL: http://arxiv.org/pdf/0705.2110
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    Bibliographic Info

    Paper provided by arXiv.org in its series Papers with number 0705.2110.

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    Date of creation: May 2007
    Date of revision:
    Publication status: Published in Applied Mathematical Finance 16, 1-2 (2009) 183-217
    Handle: RePEc:arx:papers:0705.2110

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    Web page: http://arxiv.org/

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    References

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Geman, Hélyette, 2005. "Commodities and commodity derivatives : modeling and pricing for agriculturals, metals and energy," Economics Papers from University Paris Dauphine, Paris Dauphine University 123456789/607, Paris Dauphine University.
    2. Barraquand, Jérôme & Martineau, Didier, 1995. "Numerical Valuation of High Dimensional Multivariate American Securities," Journal of Financial and Quantitative Analysis, Cambridge University Press, Cambridge University Press, vol. 30(03), pages 383-405, September.
    3. Thompson, Andrew C., 1995. "Valuation of Path-Dependent Contingent Claims with Multiple Exercise Decisions over Time: The Case of Take-or-Pay," Journal of Financial and Quantitative Analysis, Cambridge University Press, Cambridge University Press, vol. 30(02), pages 271-293, June.
    4. Bally, Vlad & Pagès, Gilles, 2003. "Error analysis of the optimal quantization algorithm for obstacle problems," Stochastic Processes and their Applications, Elsevier, Elsevier, vol. 106(1), pages 1-40, July.
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    Cited by:
    1. Nikolay Aleksandrov & Raphael Espinoza, 2011. "Optimal Oil Extraction as a multiple Real Option," OxCarre Working Papers, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford 064, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
    2. Kourouvakalis, Stylianos, 2008. "Méthodes numériques pour la valorisation d'options swings et autres problèmes sur les matières premières," Economics Thesis from University Paris Dauphine, Paris Dauphine University, Paris Dauphine University, number 123456789/116 edited by Geman, Hélyette.

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