The Multiplicative Dual for Multiple-Exercise Options

14 Pages Posted: 30 Apr 2014 Last revised: 5 Dec 2014

See all articles by Mark S. Joshi

Mark S. Joshi

University of Melbourne - Centre for Actuarial Studies (deceased)

Nicholas Yap

University of Technology Sydney (UTS) - Faculty of Business

Date Written: November 27, 2014

Abstract

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

Suggested Citation

Joshi, Mark and Yap, Nicholas, The Multiplicative Dual for Multiple-Exercise Options (November 27, 2014). Available at SSRN: https://ssrn.com/abstract=2430558 or http://dx.doi.org/10.2139/ssrn.2430558

Mark Joshi (Contact Author)

University of Melbourne - Centre for Actuarial Studies (deceased) ( email )

Melbourne, 3010
Australia

Nicholas Yap

University of Technology Sydney (UTS) - Faculty of Business ( email )

Australia

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