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350 Main Street , Malden , MA 02148 , USA , and 9600 Garsington Road , Oxford OX4 2DQ , UK: Blackwell Publishing, Inc
Erscheinungsjahr
2005
Link zum Volltext
Quelle
Wiley Blackwell Single Titles
Beschreibungen/Notizen
We present here the quantization method which is well‐adapted for the pricing and hedging of American options on a basket of assets. Its purpose is to compute a large number of conditional expectations by projection of the diffusion on optimal grids designed to minimize the (square mean) projection error (Graf and Luschgy 2000). An algorithm to compute such grids is described. We provide results concerning the orders of the approximation with respect to the regularity of the payoff function and the global size of the grids. Numerical tests are performed in dimensions 2, 4, 5, 6, 10 with American style exchange options. They show that theoretical orders are probably pessimistic.