Valuation of contingent guarantees using least-squares...

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Artigos Artigos Valuation of contingent guarantees using least-squares Monte Carlo - Bienek, T.

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Título: Valuation of contingent guarantees using least-squares Monte Carlo / T. Bienek, M. Scherer

Autor: Bienek, T. Icono con lupa

Descrição física: 26 p.

Notas: Sumario: We consider the problem of pricing modern guarantee concepts in unit-linked life insurance, where the guaranteed amount grows contingent on the performance of an investment fund that acts simultaneously as the underlying security and the replicating portfolio. Using the Martingale Method, this nonstandard pricing problem can be transformed into a fixed-point problem, whose solution requires the evaluation of conditional expectations of highly path-dependent payoffs. By adapting the least-squares Monte Carlo method for American option pricing problems, we develop a new numerical approach to approximate the value of contingent guarantees and prove its convergence. Our valuation procedure can be applied to large-scale pricing problems, for which existing methods are infeasible, and leads to significant improvements in performance.

Autores secundários: Scherer, M. Icono con lupa

Outras classificações: 6

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