Here we develop an approach for efficient pricing discrete-time American and Bermudan options which employs the fact that such options are equivalent to the European ones with a consumption, combined with analysis of the market model over a small number of steps ahead. This approach allows constructing both upper and lower bounds for the true price by Monte Carlo simulations. An adaptive choice of local lower bounds and use of the kernel interpolation technique enhance efficiency of the whole procedure, which is supported by numerical experiments.
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Belomestny, D., Milstein, G.N. (2009). Simulation Based Option Pricing. In: Härdle, W.K., Hautsch, N., Overbeck, L. (eds) Applied Quantitative Finance. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-540-69179-2_18
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DOI: https://doi.org/10.1007/978-3-540-69179-2_18
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