(Berlin : Weierstraß-Institut für Angewandte Analysis und Stochastik, 2006) Belomestny, Denis; Milstein, Grigor N.; Spokoiny, Vladimir
Here we develop methods for efficient pricing multidimensional
discrete-time American and Bermudan options by using regression based
algorithms together with a new approach towards constructing upper bounds for
the price of the option. Applying sample space with payoffs at the optimal
stopping times, we propose sequential estimates for continuation values,
values of the consumption process, and stopping times on the sample paths.
The approach admits constructing both low and upper bounds for the price by
Monte Carlo simulations. The methods are illustrated by pricing Bermudan
swaptions and snowballs in the Libor market model.
