Complex derivatives valuation: applying the Least-Squares Monte Carlo Simulation Method with several polynomial basis

Content Provider	Semantic Scholar
Author	Lima, Ursula Silveira Monteiro De Samanez, Carlos Patricio
Copyright Year	2016
Abstract	Results: We show that the choice of the basis interferes in the option's price by showing that one of them converges to the option's value faster than any other by using fewer simulated paths. In the case of an Amerasian call option, for example, we find that the preferable polynomial basis is Hermite A. For an Amerasian put option, the Power polynomial basis is recommended. Such empirical outcome is theoretically unpredictable, since in principle all basis can be indistinctly used when pricing the derivative.
File Format	PDF HTM / HTML
Alternate Webpage(s)	https://jfin-swufe.springeropen.com/track/pdf/10.1186/s40854-015-0019-0
Language	English
Access Restriction	Open
Content Type	Text
Resource Type	Article