### Abstract

Original language | English |
---|---|

Title of host publication | [n.n.] |

Publisher | Unknown Publisher |

Pages | 13 |

Number of pages | 13 |

Publication status | Published - 2002 |

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### Cite this

*[n.n.]*(pp. 13). Unknown Publisher.

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*[n.n.].*Unknown Publisher, pp. 13.

**Pricing and hedging high-dimensional American options : an irregular grid approach.** / Berridge, S.; Schumacher, H.

Research output: Chapter in Book/Report/Conference proceeding › Conference contribution › Professional

TY - GEN

T1 - Pricing and hedging high-dimensional American options

T2 - an irregular grid approach

AU - Berridge, S.

AU - Schumacher, H.

N1 - Pagination: 13

PY - 2002

Y1 - 2002

N2 - We propose and test a new method for pricing American options in a high dimensional setting. The method is centred around the approximation of the associated variational inequality on an irregular grid. We approximate the partial differential operator on this grid by appealing to the SDE representation of the stock process and computing the logarithm of the transition probability matrix of an approximating Markov chain. The option price is computed as a function of the underlyings, thus allowing for computation of deltas. The results of numerical tests in five dimensions are promising.

AB - We propose and test a new method for pricing American options in a high dimensional setting. The method is centred around the approximation of the associated variational inequality on an irregular grid. We approximate the partial differential operator on this grid by appealing to the SDE representation of the stock process and computing the logarithm of the transition probability matrix of an approximating Markov chain. The option price is computed as a function of the underlyings, thus allowing for computation of deltas. The results of numerical tests in five dimensions are promising.

M3 - Conference contribution

SP - 13

BT - [n.n.]

PB - Unknown Publisher

ER -