Abstract
Whereas a European option can be exercised only at a fixed date, an American option can be exercised any time up to its expiration. The value of an American option is the value achieved by exercising optimally. Finding this value entails finding the optimal exercise rule — by solving an optimal stopping problem — and computing the expected discounted payoff of the option under this rule. The embedded optimization problem makes this a difficult problem for simulation.
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© 2004 Springer Science+Business Media New York
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Glasserman, P. (2004). Pricing American Options. In: Monte Carlo Methods in Financial Engineering. Stochastic Modelling and Applied Probability, vol 53. Springer, New York, NY. https://doi.org/10.1007/978-0-387-21617-1_8
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DOI: https://doi.org/10.1007/978-0-387-21617-1_8
Publisher Name: Springer, New York, NY
Print ISBN: 978-1-4419-1822-2
Online ISBN: 978-0-387-21617-1
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