Regression methods for pricing complex American-style options

@article{Tsitsiklis2001RegressionMF,
  title={Regression methods for pricing complex American-style options},
  author={John N. Tsitsiklis and Benjamin Van Roy},
  journal={IEEE transactions on neural networks},
  year={2001},
  volume={12 4},
  pages={694-703}
}
We introduce and analyze a simulation-based approximate dynamic programming method for pricing complex American-style options, with a possibly high-dimensional underlying state space. We work within a finitely parameterized family of approximate value functions, and introduce a variant of value iteration, adapted to this parametric setting. We also introduce a related method which uses a single (parameterized) value function, which is a function of the time-state pair, as opposed to using a… CONTINUE READING
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