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.
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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@inproceedings{e82b63b9315649c2a028ca00f6aa6c1b,
title = "Pricing and hedging highdimensional American options: an irregular grid approach",
abstract = "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.",
author = "S. Berridge and H. Schumacher",
note = "Pagination: 13",
year = "2002",
language = "English",
pages = "13",
booktitle = "[n.n.]",
publisher = "Unknown Publisher",
}
TY  GEN
T1  Pricing and hedging highdimensional 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 