Comparisons of Alternative Quasi-Monte Carlo Sequences for American Option Pricing

17 Pages Posted: 29 Dec 2004  

Jennifer X.F. Jiang

Northwestern University - Department of Industrial Engineering and Management Sciences

John R. Birge

University of Chicago - Booth School of Business

Date Written: November 24, 2004

Abstract

Quasi-Monte Carlo sequences have been shown to provide accurate option price approximations for a variety of options. In this paper, we apply quasi-Monte Carlo sequences in a duality approach to value American options. We compare the results using different low discrepancy sequences and estimate error bounds and computational effort. The results demonstrate the value of sequences using expansions of irrationals.

Keywords: Quasi-Monte Carlo methods, numerical integration, option pricing, low discrepancy sequences

JEL Classification: C15, C44, G13

Suggested Citation

Jiang, Jennifer X.F. and Birge, John R., Comparisons of Alternative Quasi-Monte Carlo Sequences for American Option Pricing (November 24, 2004). Available at SSRN: https://ssrn.com/abstract=634201 or http://dx.doi.org/10.2139/ssrn.634201

Xuefeng Jiang

Northwestern University - Department of Industrial Engineering and Management Sciences ( email )

Evanston, IL 60208-3119
United States

HOME PAGE: http://users.iems.nwu.edu/~xfjiang

John R. Birge (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

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