Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5098547 | Journal of Economic Dynamics and Control | 2014 | 21 Pages |
Abstract
We present a new non-nested approach for computing additive upper bounds for callable derivatives using Monte Carlo simulation. It relies on the regression of Greeks computed using adjoint methods. We also show that it is possible to early terminate paths once points of optimal exercise have been reached. A natural control variate for the multiplicative upper bound is introduced which renders it competitive to the additive one. In addition, a new bi-iterative family of upper bounds is introduced which takes a stopping time, an upper bound, and a martingale as inputs.
Related Topics
Physical Sciences and Engineering
Mathematics
Control and Optimization
Authors
Mark Joshi, Robert Tang,