Fast Lower and Upper Estimates for the Price of Constrained Multiple Exercise American Options by Single Pass Lookahead Search and Nearest-Neighbor Martingale

02/26/2020
by   Nicolas Essis-Breton, et al.
0

This article presents fast lower and upper estimates for a large class of options: the class of constrained multiple exercise American options. Typical options in this class are swing options with volume and timing constraints, and passport options with multiple lookback rights. The lower estimate algorithm uses the artificial intelligence method of lookahead search. The upper estimate algorithm uses the dual approach to option pricing on a nearest-neighbor basis for the martingale space. Probabilistic convergence guarantees are provided. Several numerical examples illustrate the approaches including a swing option with four constraints, and a passport option with 16 constraints.

READ FULL TEXT

page 25

page 28

research
07/31/2015

Efficient and robust calibration of the Heston option pricing model for American options using an improved Cuckoo Search Algorithm

In this paper an improved Cuckoo Search Algorithm is developed to allow ...
research
02/24/2023

Simultaneous upper and lower bounds of American option prices with hedging via neural networks

In this paper, we introduce two methods to solve the American-style opti...
research
02/17/2023

On a Stable Method for Option Pricing: Discontinuous Petrov-Galerkin Method for Option Pricing and Sensitivity Analysis

The discontinuous Petrov Galerkin (DPG) methodology of Demkowicz and Gop...
research
09/18/2016

Principled Option Learning in Markov Decision Processes

It is well known that options can make planning more efficient, among th...
research
03/02/2022

Delegated Online Search

In a delegation problem, a principal P with commitment power tries to pi...
research
01/09/2017

On Reject and Refine Options in Multicategory Classification

In many real applications of statistical learning, a decision made from ...
research
02/22/2018

Options for encoding names for data linking at the Australian Bureau of Statistics

Publicly, ABS has said it would use a cryptographic hash function to con...

Please sign up or login with your details

Forgot password? Click here to reset