This paper provides an introduction to Monte Carlo algorithms for pricing American options written on multiple assets, with special emphasis on methods that can be applied in a multi-dimensional setting. Simulated paths can be used to estimate by nonparametric regression the continuation value of the option or the optimal exercise policy and the value functions can then be computed by backward induction.

Monte Carlo Pricing of American Options Using Nonparametric Regression

The flexibility of nonparametric regression allows to obtain accurate price estimates with remarkable speed. For illustrative purposes we price one- and two-dimensional American options.

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Please be patient as the files may be large. Type of Document - pdf; prepared on OzTeX on Macintosh; to print on Laser printer; pages: Option pricing ; American options ; Monte Carlo ; nonparametric regression ; Find related papers by JEL classification: G - Financial Economics This paper has been announced in the following NEP Reports: NEP-ALL All new papers References References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile , click on "citations" and make appropriate adjustments.: A Recursive Integration Method ," Review of Financial Studies , Society for Financial Studies, vol.

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Monte Carlo Pricing of American Options Using Nonparametric Regression. Author info Abstract Bibliographic info Download info Related research References Citations Lists Statistics Corrections. Pizzi Claudio Universita' Ca' Foscari, Venice Pellizzari Paolo universita' Ca' Foscari, Venice. Paper provided by EconWPA in its series Finance with number HTML HTML with abstract plain text plain text with abstract BibTeX RIS EndNote, RefMan, ProCite ReDIF JSON in new window.

NEP-ALL All new papers. References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile , click on "citations" and make appropriate adjustments.: Citations are extracted by the CitEc Project , subscribe to its RSS feed for this item.

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