IJPAM: Volume 109, No. 2 (2016)
OF THE AMERICAN OPTION PRICING PROBLEM
Department of Computer Sciences
University of Verona
Strada le Grazie 15, 37134, Verona, ITALY
Abstract. The problem of pricing American type options is a typical example of a non linear problem characterized by the absence of closed expressions for its evaluation. Therefore, during recent years, such an issue has been approached , both deterministically and randomly, from the algorithmic point of view, trying to derive suitable numerical approximations. In this paper, starting from the aforementioned solutions, we review some computational, stochastic inspired, methods, mainly based on the the existing link between the above recalled pricing task, and the theory of Reflected Backward Stochastic Differential Equations (BSDEs). In particular we show how suitable numerical schemes can be developed within the SBDEs framework by mean of quantization techniques as well as considering Monte Carlo methods.
Received: July 27, 2016
AMS Subject Classification: 60H15, 60H35, 90-08, 91G20, 91G80, 91B25
Key Words and Phrases: American options, reflected stochastic backward differential equations, stochastic quantization, Monte Carlo methods
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DOI: 10.12732/ijpam.v109i2.15 How to cite this paper?
Source: International Journal of Pure and Applied Mathematics
ISSN printed version: 1311-8080
ISSN on-line version: 1314-3395
Pages: 403 - 428