Least Squares Monte Carlo (LSM) method

URI: https://gptkb.org/entity/Least_Squares_Monte_Carlo_(LSM)_method
GPTKB entity
Statements (25)
Predicate Object
gptkbp:instanceOf gptkb:logic
gptkbp:advantage handles high-dimensional problems
gptkbp:alternativeTo finite difference method
binomial tree method
gptkbp:appliesTo derivative pricing
path-dependent options
gptkbp:category gptkb:computational_finance
quantitative finance
gptkbp:citation gptkb:Longstaff,_F._A.,_&_Schwartz,_E._S._(2001)._Valuing_American_options_by_simulation:_a_simple_least-squares_approach._The_Review_of_Financial_Studies,_14(1),_113-147.
gptkbp:developedBy Eduardo Schwartz
Francis Longstaff
gptkbp:estimatedCost continuation value
gptkbp:introducedIn 2001
gptkbp:limitation computationally intensive
regression bias
gptkbp:publishedIn gptkb:The_Review_of_Financial_Studies
gptkbp:requires random number generation
basis functions
gptkbp:usedFor option pricing
American option valuation
gptkbp:uses gptkb:Monte_Carlo_simulation
least squares regression
gptkbp:bfsParent gptkb:American_option_pricing_models
gptkbp:bfsLayer 7
https://www.w3.org/2000/01/rdf-schema#label Least Squares Monte Carlo (LSM) method