IDEAS home Printed from https://ideas.repec.org/p/arx/papers/math-9801057.html
   My bibliography  Save this paper

Valuation of path-dependent American options using a Monte Carlo approach

Author

Listed:
  • H. Sorge

Abstract

It is shown how to obtain accurate values for American options using Monte Carlo simulation. The main feature of the novel algorithm consists of tracking the boundary between exercise and hold regions via optimization of a certain payoff function. We compare estimates from simulation for some types of claims with results from binomial tree calculations and find very good agreement. The novel method allows to calculate so far untractable path-dependent option values.

Suggested Citation

  • H. Sorge, 1998. "Valuation of path-dependent American options using a Monte Carlo approach," Papers math/9801057, arXiv.org.
    • Handle: RePEc:arx:papers:math/9801057
    as

    Download full text from publisher

    File URL: http://arxiv.org/pdf/math/9801057
    File Function: Latest version
    Download Restriction: no
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arx:papers:math/9801057. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: arXiv administrators (email available below). General contact details of provider: http://arxiv.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.