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Pricing time-capped American options using a least squares Monte Carlo method

Paweł Stȩpniak & Zbigniew Palmowski

Journal of Computational Finance2024https://doi.org/10.21314/jcf.2024.011article
AJG 1ABDC C
Weight
0.43

What the paper says

We adopt the least squares Monte Carlo (LSMC) method to price time-capped American options. The cap can be an independent random variable or dependent on the asset price at a random time. We investigate various time caps. In particular, we give an algorithm for pricing the American options capped by the first drawdown epoch, focusing on the geometric Lévy market. We prove that our estimator converges to the true price as the discretization step tends to zero and the number of trajectories tends to infinity.

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https://doi.org/https://doi.org/10.21314/jcf.2024.011

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@article{paweł2024,
  title        = {{Pricing time-capped American options using a least squares Monte Carlo method}},
  author       = {Paweł Stȩpniak & Zbigniew Palmowski},
  journal      = {Journal of Computational Finance},
  year         = {2024},
  doi          = {https://doi.org/https://doi.org/10.21314/jcf.2024.011},
}

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Pricing time-capped American options using a least squares Monte Carlo method

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Evidence weight

0.43

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.30 × 0.4 = 0.12
M · momentum0.55 × 0.15 = 0.08
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.