Forest of stochastic meshes: A new method for valuing high-dimensional swing options

Authors:
T. J. Marshall;R. Mark Reesor
Affiliations:
Department of Applied Mathematics, The University of Western Ontario, 1151 Richmond Street North, London, ON, Canada, N6A 5B7;Department of Applied Mathematics, The University of Western Ontario, 1151 Richmond Street North, London, ON, Canada, N6A 5B7 and Department of Statistical and Actuarial Sciences, The University o ...
Venue:
Operations Research Letters
Year:
2011

Citing 4
Cited 1

Pricing American Options: A Duality Approach

Operations Research
Valuation of Commodity-Based Swing Options

Management Science
Primal-Dual Simulation Algorithm for Pricing Multidimensional American Options

Management Science
Valuation of electricity swing options by multistage stochastic programming

Automatica (Journal of IFAC)

Simulation valuation of multiple exercise options

Proceedings of the Winter Simulation Conference

Quantified Score

Hi-index	0.00

Visualization

Abstract

Swing options generalize American-style options as they allow the holder multiple exercise rights and control over the exercise amounts. In this work, we replace the standard (binomial) trees in the forest of trees algorithm with stochastic meshes, yielding the forest of stochastic meshes; a simulation-based method for valuing high-dimensional swing options. This new method handles general price processes and payoffs, produces high- and low-biased consistent estimators and a true option price confidence interval.