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Optimal quantization for the pricing of swing options

Author

Listed:
  • Olivier Aj Bardou

    (GDF-RDD)

  • Sandrine Bouthemy

    (GDF-RDD)

  • Gilles Pag`es

    (PMA)

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.

Suggested Citation

  • Olivier Aj Bardou & Sandrine Bouthemy & Gilles Pag`es, 2007. "Optimal quantization for the pricing of swing options," Papers 0705.2110, arXiv.org.
  • Handle: RePEc:arx:papers:0705.2110
    as

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    File URL: http://arxiv.org/pdf/0705.2110
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    References listed on IDEAS

    as
    1. 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.
    2. 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.
    3. 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.
    4. repec:dau:papers:123456789/607 is not listed on IDEAS
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    Cited by:

    1. 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, number 123456789/116 edited by Geman, Hélyette.
    2. Nikolay Aleksandrov & Raphael Espinoza, 2011. "Optimal Oil Extraction as a multiple Real Option," OxCarre Working Papers 064, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.

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