Stabsseminar ved Chris Rogers

Chris Rogers fra University of Bath holder stabsseminar ved Institutt for foretaksøkonomi torsdag 16. mai.

14.05.2002 - Per Arne Solend

Tema: Monte Carlo valuation of American options
Tid og sted: Torsdag 16. mai, kl. 12.15-13.30 i Aud. B

Abstract:
This paper introduces a "dual" way to price American options, based on simulating the path of the option payoff, and of a judiciously-chosen Lagrangian martingale. Taking the pathwise maximum of the payoff less the martingale provides an upper bound for the price of the option, and this bound is sharp for the optimal choice of Lagrangian martingale. As a first exploration of this method, four examples are investigated numerically; the accuracy achieved with even very simple-minded choices of Lagrangian martingale is surprising. The method also leads naturally to candidate hedging policies for the option, and estimates of the risk involved in using them.

Paper er tilgjengelig på instituttets hjemmeside, http://www.nhh.no/for/seminars/2002-spring/160502.pdf.