Journal of Computational Finance

Risk.net

Pricing American-style options by Monte Carlo simulation: alternatives to ordinary least squares

Stathis Tompaidis and ChunyuYang

ABSTRACT

We compare OLS regression against several alternatives and find that OLS regression underperforms methods that penalize the size of coefficient estimates when the number of simulation paths is small. Based on our findings, we recommend an alternative method based on a modification of the "matching projection pursuit" that we introduce in this paper.


Sorry, our subscription options are not loading right now

Please try again later. Get in touch with our customer services team if this issue persists.

New to Risk.net? View our subscription options

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here