Iterative construction of the optimal Bermudan stopping time

@article{Kolodko2006IterativeCO,
  title={Iterative construction of the optimal Bermudan stopping time},
  author={Anastasia Kolodko and John Schoenmakers},
  journal={Finance and Stochastics},
  year={2006},
  volume={10},
  pages={27-49}
}
We present an iterative procedure for computing the optimal Bermudan stopping time, hence the Bermudan Snell envelope. The method produces an increasing sequence of approximations of the Snell envelope from below, which coincide with the Snell envelope after finitely many steps. Then, by duality, the method induces a convergent sequence of upper bounds as well. In a Markovian setting the presented iterative procedure allows to calculate approximative solutions with only a few nestings of… CONTINUE READING
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Iterative construction of the optimal Bermudan stopping time

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