36,108 research outputs found
Sequential Design for Optimal Stopping Problems
We propose a new approach to solve optimal stopping problems via simulation.
Working within the backward dynamic programming/Snell envelope framework, we
augment the methodology of Longstaff-Schwartz that focuses on approximating the
stopping strategy. Namely, we introduce adaptive generation of the stochastic
grids anchoring the simulated sample paths of the underlying state process.
This allows for active learning of the classifiers partitioning the state space
into the continuation and stopping regions. To this end, we examine sequential
design schemes that adaptively place new design points close to the stopping
boundaries. We then discuss dynamic regression algorithms that can implement
such recursive estimation and local refinement of the classifiers. The new
algorithm is illustrated with a variety of numerical experiments, showing that
an order of magnitude savings in terms of design size can be achieved. We also
compare with existing benchmarks in the context of pricing multi-dimensional
Bermudan options.Comment: 24 page
American Option Pricing: From PDE Numerical Solutions to Simulation-Based Methods and Reinforcement Learning.
An American call (put) option is a contract that gives the holder the right, but not the obligation, to buy (sell) one unit of an asset (typically, stock) at a prespecified price (called strike price) at any desired time before a preset expiration time of the contract. The associated option pricing problem plays an important role in modern financial markets and one way to solve this is by searching for the optimal exercise policy, i.e., find the optimal time to exercise so that maximal reward is achieved. In this thesis, we shall discuss the modern Least Square Policy Iteration Method to solve the American option pricing problem based on Reinforcement Learning and compare it to the method of the Longstaff-Schwartz Method and the Finite Difference Method
Pricing American Options by Exercise Rate Optimization
We present a novel method for the numerical pricing of American options based
on Monte Carlo simulation and the optimization of exercise strategies. Previous
solutions to this problem either explicitly or implicitly determine so-called
optimal exercise regions, which consist of points in time and space at which a
given option is exercised. In contrast, our method determines the exercise
rates of randomized exercise strategies. We show that the supremum of the
corresponding stochastic optimization problem provides the correct option
price. By integrating analytically over the random exercise decision, we obtain
an objective function that is differentiable with respect to perturbations of
the exercise rate even for finitely many sample paths. The global optimum of
this function can be approached gradually when starting from a constant
exercise rate.
Numerical experiments on vanilla put options in the multivariate
Black-Scholes model and a preliminary theoretical analysis underline the
efficiency of our method, both with respect to the number of
time-discretization steps and the required number of degrees of freedom in the
parametrization of the exercise rates. Finally, we demonstrate the flexibility
of our method through numerical experiments on max call options in the
classical Black-Scholes model, and vanilla put options in both the Heston model
and the non-Markovian rough Bergomi model
Emergency Management Training for Transportation Agencies
State transportation agencies have a variety of responsibilities related to emergency management. Field personnel manage events--from day-to-day emergencies to disasters--using the Incident Command System (ICS) as their organizational basis. At the headquarters level, the Emergency Operations Center (EOC) coordinates the use of resources across the department and its districts, with other state departments and agencies, and through the federal Emergency Support Function 1. District-level EOCs coordinate with the department. In extreme events, the transportation department may only be able to deliver limited essential services in austere conditions, so a continuity of operations/ continuity of government plan (COOP/COG) is essential. This research applied the principles of andragogy to deliver ICS field level training, EOC training and COOP/COG training to state transportation agency’s staff in all districts and at headquarters. The data supports the need for adult-oriented methods in emergency management training
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