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American Option pricing under Mutiscale Model using Monte Carlo and Least-Square approach
Mälardalen University, School of Education, Culture and Communication, Educational Sciences and Mathematics.
Mälardalen University, School of Education, Culture and Communication, Educational Sciences and Mathematics.
2017 (English)Independent thesis Basic level (degree of Bachelor), 10 credits / 15 HE creditsStudent thesis
Abstract [en]

   In the finance world, option pricing techniques have become an appealing topic among researchers, especially for pricing American options. Valuing this option involves more factors than pricing the European style one, which makes it more computationally challenging. This is mainly because the holder of American options has the right to exercise at any time up to maturity. There are several approaches that have been proved to be efficient and applicable for maximizing the price of this type of options. A common approach is the Least squares method proposed by Longstaff and Schwartz. The purpose of this thesis is to discuss and analyze the implementation of this approach under the Multiscale Stochastic Volatility model. Since most financial markets show randomly variety of volatility, pricing the option under this model is considered necessary. A numerical study is performed to present that the Least-squares approach is indeed effective and accurate for pricing American options.

Place, publisher, year, edition, pages
2017. , 39 p.
National Category
Mathematical Analysis
Identifiers
URN: urn:nbn:se:mdh:diva-35848OAI: oai:DiVA.org:mdh-35848DiVA: diva2:1111860
Subject / course
Mathematics/Applied Mathematics
Presentation
2017-06-01, 17:30 (English)
Supervisors
Examiners
Available from: 2017-06-21 Created: 2017-06-19 Last updated: 2017-06-21Bibliographically approved

Open Access in DiVA

fulltext(366 kB)31 downloads
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CiteExportLink to record
Permanent link

Direct link
Cite
Citation style
  • apa
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf