Upper Bounds for American Option Prices using Regression with Martingale Basis Functions (2004)
by
N. P. Firth
BibTeX
@MISC{Firth04upperbounds,
author = {N. P. Firth},
title = {Upper Bounds for American Option Prices using Regression with Martingale Basis Functions},
year = {2004}
}
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Abstract
High dimensional American options have no analytic solution and are di#cult to price numerically. Progress has been made in using Monte Carlo simulation to give both lower and upper bounds on the price. Building on an idea of Glasserman and Yu we investigate the utility of martingale basis functions in regression based approximation methods. Regression methods are known to give lower bounds easily, however upper bounds are usually computationally expensive.
