Please use this identifier to cite or link to this item: http://hdl.handle.net/10995/111770
Title: Sensitivities for Bermudan Options by Regression Methods
Authors: Belomestny, D.
Milstein, G. N.
Schoenmakers, J.
Issue Date: 2010
Publisher: Springer Science and Business Media LLC
Citation: Belomestny D. Sensitivities for Bermudan Options by Regression Methods / D. Belomestny, G. N. Milstein, J. Schoenmakers // Decisions in Economics and Finance. — 2010. — Vol. 33. — Iss. 2. — P. 117-138.
Abstract: In this article, we propose several pathwise and finite difference-based methods for calculating sensitivities of Bermudan options using regression methods and Monte Carlo simulation. These methods rely on conditional probabilistic representations that allow, in combination with a regression approach, for efficient simultaneous computation of sensitivities at many initial positions. Assuming that the price of a Bermudan option can be evaluated sufficiently accurate, we develop a method for constructing deltas based on least squares. We finally propose a testing procedure for assessing the performance of the developed methods and give a numerical illustration. © 2009 Springer-Verlag.
Keywords: AMERICAN AND BERMUDAN OPTIONS
CONDITIONAL PROBABILISTIC REPRESENTATIONS
DELTAS
MONTE CARLO SIMULATION
OPTIMAL STOPPING TIMES
REGRESSION METHODS
URI: http://hdl.handle.net/10995/111770
Access: info:eu-repo/semantics/openAccess
SCOPUS ID: 77957369611
ISSN: 1593-8883
metadata.dc.description.sponsorship: Partially supported by the Deutsche Forschungsgemeinschaft through SFB 649 “Economic Risk” and DFG Research Center Matheon “Mathematics for Key Technologies” in Berlin.
Appears in Collections:Научные публикации, проиндексированные в SCOPUS и WoS CC

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