NDLI: Enhanced Tilley’s bundling algorithm using memory reduction Monte Carlo method

Content Provider	Springer Nature Link
Author	Chan, Raymond H. Ma, Ka Chun Wong, Chi Yan
Copyright Year	2005
Abstract	When pricing American-style options by Tilley’s bundling algorithm, one has to store the simulated asset prices at all time steps on all paths in order to determine when to exercise the options. If N time steps and M paths are used, then the storage requirement is M ⋅ N. In this paper, we improve Tilley’s bundling algorithm [6] by applying our backward-path method, which requires only O(M) storage. The only additional computational cost is that we have to generate each random number twice instead of once. For machines with limited memory, we can now use larger values of M and N to improve the accuracy in pricing options.
Starting Page	37
Ending Page	46
Page Count	10
File Format	PDF
ISSN	00080624
Journal	CALCOLO
Volume Number	42
Issue Number	1
e-ISSN	11265434
Language	English
Publisher	Springer-Verlag
Publisher Date	2005-01-01
Publisher Place	Berlin, Heidelberg
Access Restriction	One Nation One Subscription (ONOS)
Subject Keyword	Theory of Computation Numerical Analysis
Content Type	Text
Resource Type	Article
Subject	Algebra and Number Theory Computational Mathematics

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Enhanced Tilley’s bundling algorithm using memory reduction Monte Carlo method