Artikel
Forest of stochastic trees: A method for valuing multiple exercise options
We present the Forest of Stochastic Trees (FOST) method for pricing multiple exercise options by simulation. The proposed method uses stochastic trees in place of binomial trees in the Forest of Trees algorithm originally proposed to value swing options, hence extending that method to allow for a multi-dimensional underlying process. The FOST can also be viewed as extending the stochastic tree method for valuing (single exercise) American-style options to multiple exercise options. The proposed valuation method results in positively- and negatively-biased estimators for the true option value. We prove the sign of the estimator bias and show that these estimators are consistent for the true option value. This method is of particular use in cases where there is potentially a large number of assets underlying the contract and/or the underlying price process depends on multiple risk factors. Numerical results are presented to illustrate the method.
- Sprache
-
Englisch
- Erschienen in
-
Journal: Journal of Risk and Financial Management ; ISSN: 1911-8074 ; Volume: 13 ; Year: 2020 ; Issue: 5 ; Pages: 1-31 ; Basel: MDPI
- Klassifikation
-
Wirtschaft
- Thema
-
Monte Carlo
multiple exercise options
dynamic programming
stochastic optimal control
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Reesor, R. Mark
Marshall, T. James
- Ereignis
-
Veröffentlichung
- (wer)
-
MDPI
- (wo)
-
Basel
- (wann)
-
2020
- DOI
-
doi:10.3390/jrfm13050095
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:43 MEZ
Datenpartner
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Artikel
Beteiligte
- Reesor, R. Mark
- Marshall, T. James
- MDPI
Entstanden
- 2020
Ähnliche Objekte (12)
Valuing options in Heston's stochastic volatility model : another analytical approach
Valuing options in Heston's stochastic volatility model: Another analytical approach
Valuing joint ventures using real options
Valuing Joint Ventures Using Real Options
Quadrinomial trees with stochastic volatility to value real options
Valuing dynamic capabilities-based synergies with real options
Valuing collaborative synergies with real options application: From dynamic political capabilities perspective
How do executives exercise their stock options?
Valuing quality
Exercise strategies for American exotic options under ambiguity
Valuing the environment
Valuing rural amenities
Valuing options in Heston's stochastic volatility model : another analytical approach
Valuing options in Heston's stochastic volatility model: Another analytical approach
Valuing joint ventures using real options
Valuing Joint Ventures Using Real Options
Quadrinomial trees with stochastic volatility to value real options
Valuing dynamic capabilities-based synergies with real options
Valuing collaborative synergies with real options application: From dynamic political capabilities perspective
How do executives exercise their stock options?
Valuing quality
Exercise strategies for American exotic options under ambiguity
Valuing the environment
Valuing rural amenities
Valuing options in Heston's stochastic volatility model : another analytical approach
Valuing options in Heston's stochastic volatility model: Another analytical approach
Valuing joint ventures using real options
Valuing Joint Ventures Using Real Options
Quadrinomial trees with stochastic volatility to value real options
Valuing dynamic capabilities-based synergies with real options
Valuing collaborative synergies with real options application: From dynamic political capabilities perspective
How do executives exercise their stock options?
Valuing quality
Exercise strategies for American exotic options under ambiguity
Valuing the environment