Assessing the Least Squares Monte-Carlo Approach to American Option Valuation

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Subfields: Finance

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Valuation of energy storage: an optimal switching approach (2010, background): “Nevertheless, extensive empirical experiments (Stentoft 2004) have strongly supported the general TvR/LSM methodology.”
Gas Storage Valuation Using a Monte Carlo Method (2008, methodology): “Glasserman [2004] offers an overview of variance reduction techniques, and Stentoft [2004a] finds that antithetic sampling does not always outperform the standard simulation.”
Regression-based algorithms for life insurance contracts with surrender guarantees (2010, unknown): “The joint effect of H and M on convergence is less clear: some non-asymptotic results can be found in Gobet et al. (2005), while interesting numerical investigations are reported by Moreno and Navas (2003) and Stentoft (2004).”
Pricing American options when the underlying asset follows GARCH processes (2005, methodology): “The Least Squares Monte Carlo method, or LSM method for short, has been examined in some detail in Moreno & Navas (2003) and Stentoft (2004a), whereas the mathematical foundation for the use of the method in derivatives research is provided in Stentoft (2004b).”