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Special Semester on Stochastics with Emphasis on Finance
Linz, September 2008 - December 2008
Presentation: Optimal quantization for the pricing of American style derivatives

Workshop: Computational Methods with Applications in Finance, Insurance and the Life Sciences AND Stochastic Methods in Partial Differential Equations and Applications of Deterministic and Stochastic PDEs

Time: Tue, November 18, 2008, 10:50-11:40

Speaker: Gilles Pages

Abstract

After a brief introduction to the theoretical and numerical aspects of optimal quantization, we will show how it can be used to approximate conditional expectations and as second step how to design some optimal quantization trees of a (discrete time) Feller Markov process. Then we will apply this approach to price and hedge multi-asset American options and some classes of swing options. Other applications to stochastic control and non-linear filtering will be presented in connection with financial modelling.

Presentation slides (pdf, 602 KB)

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