This paper surveys the literature on option pricing from its origins to the present. An
extensive review of valuation methods for European- and American-style claims is provided. …

The Monte Carlo approach has proved to be a valuable and flexible computational tool in
modern finance. This paper discusses some of the recent applications of the Monte Carlo …

We develop a simulation algorithm for estimating the prices of American-style securities, ie,
securities with opportunities for early exercise. Our algorithm provides both point estimates …

This paper examines model specification issues and estimates diffusive and jump risk premia
using S&P futures option prices from 1987 to 2003. We first develop a time series test to …

We develop lower and upper bounds on the prices of American call and put options written
on a dividend-paying asset. We provide two option price approximations, one based on the …

The stochastic differential equations for affine jump diffusion models do not yield exact
solutions that can be directly simulated. Discretization methods can be used for simulating …

Simulation has proved to be a valuable tool for estimating security prices for which simple
closed form solutions do not exist. In this paper we present two direct methods, a pathwise …

… This combination provides an interval estimate for the true price, in the same spirit as the
interval estimates in Broadie and Glasserman (1997) and in this paper. Glasserman (2004, pp. …

This paper describes a practical algorithm based on Monte Carlo simulation for the pricing
of multidimensional American (ie, continuously exercisable) and Bermudan (ie, discretely …

… The “true” value is determined from a trinomial procedure modified in several ways to
specifically handle discrete barriers and is fully described in Broadie et al. (1996). This numerical …