Simulation for American Options: Regression Now or Regression Later?

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Subfields: Finance

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Monte Carlo and Quasi-Monte Carlo Sampling (2009, methodology): “Compared to the original Halton and Faure sequences, in practice, the Sobol’ sequence seems to work quite well even in large dimensions, as long as the direction numbers are chosen appropriately (for example, see [136, 185, 260]).”
Least-Squares Monte Carlo for Backward SDEs (2012, methodology): “We note that the number of simulated paths must grow polynomially in the number of basis functions, while even an exponential growth of sample paths is necessary for the Longstaff-Schwartz algorithm for pricing American options, see Glasserman and Yu (2004).”