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Pricing and hedging American-style options: a simple simulation-based approach
2010
Journal of Computational Finance
This paper presents a simple yet powerful simulation-based approach for approximating the values of prices and Greeks (ie, derivatives with respect to the underlying spot prices, such as delta, gamma, etc) for American-style options. This approach is primarily based upon the least squares Monte Carlo (LSM) algorithm and is thus termed the modified LSM (MLSM) algorithm. The key to this approach is that with initial asset prices randomly generated from a carefully chosen distribution, we obtain a
doi:10.21314/jcf.2010.220
fatcat:nrl3kat645hchgmculepoqwtsy