An adaptive Monte Carlo algorithm for European and American options
Publish Year: 1401
Type: Journal paper
Language: English
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Document National Code:
JR_CMDE-10-2_015
Index date: 29 January 2023
An adaptive Monte Carlo algorithm for European and American options abstract
In this paper, a new adaptive Monte Carlo algorithm is proposed to solve systems of linear algebraic equations (SLAEs). The corresponding properties of the algorithm and its advantages over the conventional and previous adaptive Monte Carlo algorithms are discussed and theoretical results are established to justify the convergence of the algorithm. Furthermore, the algorithm is used to solve the SLAEs obtained from finite difference method for the problem of European and American options pricing. Numerical tests are performed on examples with matrices of different sizes and on SLAEs coming from option pricing problems. Comparisons with standard numerical and stochastic algorithms are also done which demonstrate the computational efficiency of the proposed algorithm.
An adaptive Monte Carlo algorithm for European and American options Keywords:
Adaptive Monte Carlo algorithm , finite difference method , Black Scholes model , European and American put option
An adaptive Monte Carlo algorithm for European and American options authors
Mahboubeh Aalaei
Insurance Research Center, Saadat Abad, Tehran, Iran.
Mahnaz Manteqipour
Insurance Research Center, Saadat Abad, Tehran, Iran.
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