Pricing of american and european options using the Markov decision processes

Sławomir Mentzen ()

Acta Universitatis Nicolai Copernici, Ekonomia, 2012, vol. 43, issue 2, 211-220

Abstract: The paper describes the theoretical foundations of Markov decision processes (MDP), presents the pricing algorithms for European and American call and put options using the MDP. Results were compared with results obtained using the Black-Scholes model.

Keywords: Markov decision processes; European options; American options; option pricing; optimal decisions. (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:cpn:umkanc:2012:p:211-220

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