The Multiplicative Dual for Multiple-Exercise Options
14 Pages Posted: 30 Apr 2014 Last revised: 5 Dec 2014
Date Written: November 27, 2014
We derive the first known multiplicative dual for Bermudan type options that can be exercised more than once. Our multiplicative dual possesses the almost sure property, thus making it a viable alternative to the additive one. A method to compute the multiplicative upper bound is presented and the primal-dual algorithm is naturally extended to the multiplicative multiple-exercise case.
Keywords: multi-exercise, Bermudan option, Monte Carlo simulation, multiplicative upper bounds
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