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2015 | nr 41 | 81--93
Tytuł artykułu

Least-Squares Monte Carlo Simulation for Time Value of Options and Guarantees Calculation

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Warianty tytułu
Języki publikacji
The article presents an application of least-squares Monte Carlo concept to calculation of Time Value of Options and Guarantees - Market Consistent Embedded Value component. Previously used in American-type options' valuation, this method proved to be a very effective and time-saving tool. The paper summarizes analysis performed on the theoretical Open Pension Fund portfolio (based on Polish market average data). (original abstract)
Opis fizyczny
  • University of Warsaw
  • Andreatta, Giulia and Stefano Corradin. 2003. Valuing the Surrender Options Embedded in a Portfolio of Italian Life Guaranteed Participating Policies: a Least Squares Monte Carlo Approach. (accesed 08.09.2015).
  • Bauer, Daniel, Daniela Bergmann and Andreas Reuss. 2009. Solvency II and Nested Simulations - a Least-Squares Monte Carlo Approach.$FILE/93_final paper_Bauer, et al.pdf (accesed 08.09.2015).
  • Bacinello, Anna R. 2003. "Pricing guaranteed life insurance participating policies with annual premiums and surrender option." North American Actuarial Journal 7(3):1-17.
  • Ballotta, Laura and Steven Haberman. 2002. Guaranteed annuity conversion options and their valuation. Faculty of Actuarial Science and Statistics, Cass Business School, City University London. (accesed 08.09.2015).
  • Bernard, Carol and Christiane Lemieux. 2008. "Fast simulation of equity-linked life insurance contracts with a surrender option." Proceedings of the 2008 Winter Simulation Conference, 444-452. (accesed 08.09.2015).
  • Dimitrakopoulos, Georgios. 2013. Least-Squares Monte Carlo Simulation and High Performance Computing for Solvency II Regulatory Capital Estimation. Manchester Business School. (accesed 08.09.2015).
  • Hörig, Mario and Michael Leitschkis. 2012. Solvency II Proxy Modelling via Least Squares Monte Carlo. Millman Research Report, January 2012. (accesed 08.09.2015).
  • Longstaff, Francis A. and Eduardo S. Schwartz. 2001. "Valuing American Options by Simulation: A Simple Least-Squares Approach." The Review of Financial Studies 14(1): 113-147.
  • Moreno, Manuel and Javier Navas. 2003. "On the Robustness of Least-squares Monte Carlo (LSM) for Pricing American Derivatives." Review of Derivatives Research 6: 107-128.
  • Teuguia Oberlain Nteukam, Jiaen Ren and Frédéric Planchet F. 2014. Internal Model In Life Insurance: Application of Least Squares Monte Carlo in Risk Assessment. Laboratoire de Sciences Actuarielle et Financière. (accesed 08.09.2015).
  • Sabry A. Abdel Sabour and Richard Poulin. 2006. "Valuing Real Capital Investments Using The Least-Squares Monte Carlo Method." The Engineering Economist 51(2): 141-160.
  • Rodrigues, Artur and Manuel J. Rocha Armada. 2006) The Valuation of Real Options with the Least Squares Monte Carlo Simulation Method. (accesed 08.09.2015).
  • Stentoft, Lars. 2002. "Convergence of the Least Squares Monte Carlo Approach to American Option Valuation." School of Economics and Management, University of Aarhus. (accesed 08.09.2015).
  • Vasicek, Oldrich. 1977. "An Equilibrium Characterisation of the Term Structure". Journal of Financial Economics 5(2): 177-188.
  • Vedani, Julien and Laurent Devineau. 2012. Solvency assessment within the ORSA framework: issues and quantitative methodologies. (accesed 08.09.2015).
  • Quiyi, Jia. 2009. Pricing American Options using Monte Carlo Methods. U.U.D.M. Project Report 2009:8. Deaprtment of Mathematics, Uppsala University. (accesed 08.09.2015).
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