On the robustness of least-squares Monte Carlo (LSM) for pricing American derivatives
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- dc.contributor.author Moreno, Manuelca
- dc.contributor.author Navas, Javier R.ca
- dc.contributor.other Universitat Pompeu Fabra. Departament d'Economia i Empresa
- dc.date.accessioned 2017-07-26T12:08:03Z
- dc.date.available 2017-07-26T12:08:03Z
- dc.date.issued 2001-04-01
- dc.date.modified 2017-07-23T02:06:05Z
- dc.description.abstract This paper analyses the robustness of Least-Squares Monte Carlo, a technique recently proposed by Longstaff and Schwartz (2001) for pricing American options. This method is based on least-squares regressions in which the explanatory variables are certain polynomial functions. We analyze the impact of different basis functions on option prices. Numerical results for American put options provide evidence that a) this approach is very robust to the choice of different alternative polynomials and b) few basis functions are required. However, these conclusions are not reached when analyzing more complex derivatives.
- dc.format.mimetype application/pdfca
- dc.identifier https://econ-papers.upf.edu/ca/paper.php?id=543
- dc.identifier.citation Review of Derivatives Research, 6 (2003), 2 (May), pp. 107-128
- dc.identifier.uri http://hdl.handle.net/10230/951
- dc.language.iso eng
- dc.relation.ispartofseries Economics and Business Working Papers Series; 543
- dc.rights L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons
- dc.rights.accessRights info:eu-repo/semantics/openAccess
- dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
- dc.subject.keyword least-squares monte carlo
- dc.subject.keyword option pricing
- dc.subject.keyword american options
- dc.subject.keyword Finance and Accounting
- dc.title On the robustness of least-squares Monte Carlo (LSM) for pricing American derivativesca
- dc.type info:eu-repo/semantics/workingPaper