Monte Carlo methods via a dual approach for some discrete time stochastic control problems
We consider a class of discrete time stochastic control problems motivated by some financial applications. We use a pathwise stochastic control approach to provide a dual formulation of the problem. This enables us to develop a numerical technique for obtaining an estimate of the value function which improves on purely regression based methods. We demonstrate the competitiveness of the method on the example of a gas storage valuation problem.
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- Philip Protter & Emmanuelle Clément & Damien Lamberton, 2002. "An analysis of a least squares regression method for American option pricing," Finance and Stochastics, Springer, vol. 6(4), pages 449-471.
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- repec:spr:compst:v:71:y:2010:i:3:p:503-533 is not listed on IDEAS
- Denis Belomestny & Anastasia Kolodko & John Schoenmakers, 2009. "Regression methods for stochastic control problems and their convergence analysis," SFB 649 Discussion Papers SFB649DP2009-026, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
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