Parallel pricing algorithms for multi-dimensional Bermudan/American options using Monte Carlo methods

Authors:
Viet_Dung Doan;Abhijeet Gaikwad;Mireille Bossy;Françoise Baude;Ian Stokes-Rees
Affiliations:
INRIA Sophia Antipolis Méditerranée, I3S CNRS, Université de Nice Sophia-Antipolis, 2004, Route des Lucioles, BP93, 06902 Sophia-Antipolis Cedex, France;INRIA Sophia Antipolis Méditerranée, I3S CNRS, Université de Nice Sophia-Antipolis, 2004, Route des Lucioles, BP93, 06902 Sophia-Antipolis Cedex, France;INRIA Sophia Antipolis Méditerranée, I3S CNRS, Université de Nice Sophia-Antipolis, 2004, Route des Lucioles, BP93, 06902 Sophia-Antipolis Cedex, France;INRIA Sophia Antipolis Méditerranée, I3S CNRS, Université de Nice Sophia-Antipolis, 2004, Route des Lucioles, BP93, 06902 Sophia-Antipolis Cedex, France;Department Biological Chemistry & Molecular Pharmacology, Harvard Medical School, SGM-105, Harvard Medical School, 250 Longwood Ave, Boston, MA 02115, USA
Venue:
Mathematics and Computers in Simulation
Year:
2010

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Abstract

Abstract: In this paper we present two parallel Monte Carlo based algorithms for pricing multi-dimensional Bermudan/American options. First approach relies on computation of the optimal exercise boundary while the second relies on classification of continuation and exercise values. We also evaluate the performance of both the algorithms in a desktop grid environment. We show the effectiveness of the proposed approaches in a heterogeneous computing environment, and identify scalability constraints due to the algorithmic structure.