Research On American Option And Bond Pricing Based On CV - LSM Model

In the study of using the method of least squares Monte Carlo(LSM) for American option pricing and bond pricing, how to improve the accuracy in limited operation scale, has been a research focus in academia and industry. This paper in the first chapter introduces the concept and significance of least squares Monte Carlo method, the terms of convertible bonds and their characteristics, then we use the CV-LSM method to study American option pricing, and gives the option of perform boundary in the second chapter,.In the third chapter, using the arithmetic average American-Asian option pricing for the calculation of the object, by selecting the geometric average Asian option pricing formula as a control variable(CV), such that the sample variance is significantly reduced, thereby improving the accuracy.In this chapter,the method then is further extended to the multi-dimensional(arithmetic American-Asian rainbow options) on the issue, through simulation, to verify the effectiveness of the method in high-dimensional problems.The fourth chapter in this paper mainly use CV-LSM method to solve three problems about convertible bonds pricing: interaction American option feature, path dependence and the terms of the study between convertible bonds.Study for the domestic convertible bonds,for example Ping An convertible bonds, ICBC convertible bonds, Prudential convertible bonds, Petrochemical convertible bonds, pricing to consider stochastic interest rate, under stochastic volatility.Finally, the conclusion and prospect in this paper gives the inadequate of the paper and the future research direction.