q-fin updates on arXiv.org
Thu, 27 Feb 2020 06:01:45 GMT language
This article presents fast lower and upper estimates for a large class of
options: the class of constrained multiple exercise American options. Typical
options in this class are swing options with volume and timing constraints, and
passport options with multiple lookback rights. The lower estimate algorithm
uses the artificial intelligence method of lookahead search. The upper estimate
algorithm uses the dual approach to option pricing on a nearest-neighbor basis
for the martingale space. Probabilistic convergence guarantees are provided.
Several numerical examples illustrate the approaches including a swing option
with four constraints, and a passport option with 16 constraints.