Pricing American-style securities using simulation

Article Abstract:

Researchers in the field of computational finance have developed a simulation algorithm for determining American-style security prices. Results show that price highs and lows are asymptotically biased and converge towards the true price. The algorithm gets around the bias problem of pricing policy by presenting two values for each security which account for both high biases and low biases.

Security brokers and dealers, Securities Brokerage, Securities Trading, Securities, Securities prices, Securities industry, Computer simulation

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Option prices under Bayesian learning: implied volatility dynamics and predictive densities

Article Abstract:

It is proved that the Bayesian learning effects can explain many of the empirical biases of the African American and Scholes option pricing. An equilibrium model where dividend news develop on a binomial lattice is proposed and a closed-form pricing formulas for European options are derived.

Europe, Bayesian statistical decision theory, Bayesian analysis

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Convergence and biases of Monte Carlo estimates of American option prices using a parametric exercise rule

Article Abstract:

The author develops a new, improved algorithm for estimating the value of United States options.

United States

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