http://www.erasmusenergy.com en-us N/A dejong@kyos.com Tue, 06 Jan 2009 11:42:17 CET 20 http://www.erasmusenergy.com/articles/107/1/Monte-Carlo-Valuation-of-American-Options-through-Computation-of-the-Optimal-Exercise-Frontier/Page1.html Published in:
Publication year: 2002
Co-author 1: Fernando Zapatero

This paper introduces a Monte Carlo simulation method for pricing multidimensional American options based on the computation of the optimal exercise frontier. We consider Bermudan options that can be exercised at a finite number of times and compute the optimal exercise frontier recursively. We show that for every date of possible exercise, any single point of the optimal exercise frontier is a fixed point of a simple algorithm. Once the frontier is computed, we use plain vanilla Monte Carlo to price the option and get a low-biased estimator. We illustrate the method with applications to several types of options.]]> no@spam.com (Alfredo Ibanez) Mon, 10 Dec 2007 14:22:47 CET http://www.erasmusenergy.com/articles/107/1/Monte-Carlo-Valuation-of-American-Options-through-Computation-of-the-Optimal-Exercise-Frontier/Page1.html http://www.erasmusenergy.com/articles/52/1/Valuation-by-simulation-of-contingent-claims-with-multiple-early-exercise-opportunities/Page1.html Published in: Mathematical Finance
Publication year: 2004

This paper introduces the application of Monte Carlo simulation technology to the valuation of securities that contain many (buying or selling) rights, but for which a limited number can be exercised per period, and penalties if a minimum quantity is not exercised before maturity. These securities combine the characteristics of American options, with the additional constraint that only a few rights can be exercised per period and therefore their price depends also on the number of living rights (i.e. American-Asian-style payoffs), and forward securities. These securities give flexibility-of-delivery options and are common in energy markets (e.g., take-or-pay or swing options) and as real options (e.g., the development of a mine). First, we derive a series of properties for the price and the optimal exercise frontier of these securities. Second, we price them by simulation, extending the Ibanez and Zapatero (2004) method to this problem.]]> no@spam.com (Alfredo Ibanez) Thu, 27 Sep 2007 16:45:08 CEST http://www.erasmusenergy.com/articles/52/1/Valuation-by-simulation-of-contingent-claims-with-multiple-early-exercise-opportunities/Page1.html