Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5128367 | Operations Research Letters | 2017 | 6 Pages |
Abstract
Least squares Monte Carlo (LSM) is commonly used to manage and value early or multiple exercise financial or real options. Recent research in this area has started applying approximate linear programming (ALP) and its relaxations, which aim at addressing a possible ALP drawback. We show that regress-later LSM is itself an ALP relaxation that potentially corrects this ALP shortcoming. Our analysis consolidates two streams of research and supports using this LSM version rather than ALP on the considered models.
Related Topics
Physical Sciences and Engineering
Mathematics
Discrete Mathematics and Combinatorics
Authors
Selvaprabu Nadarajah, Nicola Secomandi,