Path-Dependent American Options function of two state variables. Under Local Volatility

Olivier Deloire () and Louis Roth ()
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Olivier Deloire: Ecole Supérieure d'Electricité - SUPELEC (FRANCE)

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Abstract: this article presents a generic numerical method to price American options, under local volatility, that are function of one or two path dependent variables (e.g. dependence on the average AND the maximum value of the underlying).

Keywords: monte-carlo; ODgrid; interpolation; Akima; Keys convolution interpolation; pde; Asian option; Lookback option; American option; Hull and White; Cheyette; local volatility trinomial tree implicit explicit monte-carlo ODgrid interpolation Akima Keys convolution interpolation pde Asian option Lookback option American option Hull and White Cheyette. Contents : 1. Option on one state variable…………………………………………………………………………………………..02 1.1 ODgrid setup and interpolation 1.2 American option on Average or Maximum 2. Option on two state variables…………………………………………………………………………………………10 2.1 ODgrid setup and interpolation 2.2 American option on Average and Maximum 3. Remarks…………………………………; local volatility; trinomial tree; implicit; explicit (search for similar items in EconPapers)
Date: 2025-03
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