Pricing American Rainbow Options
碩士 === 國立臺灣大學 === 國際企業學研究所 === 104 === This paper extends the forward Monte Carlo (FMC) method, which have been developed for the basic types of American options, to the valuation of two-asset American rainbow options. The main advantage of this method is that it does not use backward induction as...
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| Format: | Others |
| Language: | en_US |
| Published: |
2016
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| Online Access: | http://ndltd.ncl.edu.tw/handle/33904053622079603217 |
| Summary: | 碩士 === 國立臺灣大學 === 國際企業學研究所 === 104 === This paper extends the forward Monte Carlo (FMC) method, which have been developed for the basic types of American options, to the valuation of two-asset American rainbow options.
The main advantage of this method is that it does not use backward induction as required by other methods. Instead, the proposed approach relies on a wise determination about whether a pair of simulated stock prices has entered the exercise region.
A series of numerical experiments are provided to compare the performance with the binomial tree model and least squares method and demonstrate the efficiency of the forward methods.
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