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Consistency of the Stochastic Mesh Method

Authors:
Yuri Kashtanov

Keywords: Optimal stopping; American option; Stochastic mesh

Abstract:
A Monte Carlo method for pricing high-dimensional American options is considered. The consistency of the stochastic mesh method is studied. Some "natural" estimators of this method have infinite variance. A modification which gives consistent estimators for a diffusion model is proposed. It is shown that the variance of estimators is inverse proportional to the number of points in each layer of the mesh.

Pages: 103 to 107

Copyright: Copyright (c) IARIA, 2014

Publication date: October 12, 2014

Published in: conference

ISSN: 2308-4537

ISBN: 978-1-61208-371-1

Location: Nice, France

Dates: from October 12, 2014 to October 16, 2014