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Optimal quantization for the pricing of swing options

  • Olivier Aj Bardou

    (GDF-RDD)

  • Sandrine Bouthemy

    (GDF-RDD)

  • Gilles Pag\`es

    (PMA)

Registered author(s):

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

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    Date of creation: May 2007
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    Publication status: Published in Applied Mathematical Finance 16, 1-2 (2009) 183-217
    Handle: RePEc:arx:papers:0705.2110
    Contact details of provider: Web page: http://arxiv.org/

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    1. Barraquand, Jérôme & Martineau, Didier, 1995. "Numerical Valuation of High Dimensional Multivariate American Securities," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 30(03), pages 383-405, September.
    2. Bally, Vlad & Pagès, Gilles, 2003. "Error analysis of the optimal quantization algorithm for obstacle problems," Stochastic Processes and their Applications, Elsevier, vol. 106(1), pages 1-40, July.
    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, vol. 30(02), pages 271-293, June.
    4. Geman, Hélyette, 2005. "Commodities and commodity derivatives : modeling and pricing for agriculturals, metals and energy," Economics Papers from University Paris Dauphine 123456789/607, Paris Dauphine University.
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