Year: 2024
Type: article
Abstract: We proposed a two-step Longstaff Schwartz Monte Carlo (LSMC) method with two regression models fitted at each time step to price game options. Although the original LSMC can be used to price game options with an enlarged range of path in regression and a modified cashflow updating rule, we identified a drawback of such approach, which motivated us to propose our approach. We implemented numerical examples with benchmarks using binomial tree and numerical PDE, and it showed that our method produces more reliable results comparing to the original LSMC.
Source: Japan Journal of Research
Author: Ce Wang
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: hybrid
OpenAlex ID: W4403218760