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Longstaff-Schwartz Method/Evidence
Method evidence record

Longstaff-Schwartz Method

The Longstaff-Schwartz method (2001) is a Monte Carlo algorithm for pricing American options and Bermudan swaptions by approximating the optimal exercise boundary via least-squares regression. It has become the industry standard for pricing path-dependent derivatives where analytical solutions do not exist.

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Longstaff-Schwartz Least-Squares Monte Carlo
Taxonomic method record · ml-model / quantitative-finance
  • Longstaff, F. A., & Schwartz, E. S. (2001). Valuing American options by simulation: A simple least-squares approach. Review of Financial Studies, 14(1), 113-147. · DOI 10.1093/rfs/14.1.113
  • Clements, D. J., & Minca, A. (2008). A simulation approach to estimating near-optimal valuation functions for Bermudan options. Journal of Computational Finance, 12(2), 73-96. · URL
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Related methods

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Used in the same domainBates Modelmachine-suggested · Relational suggestion, not evidence.Used in the same domainLocal Volatility (Dupire)machine-suggested · Relational suggestion, not evidence.Used in the same domainRisk-Neutral Valuationmachine-suggested · Relational suggestion, not evidence.Used in the same domainSABR Modelmachine-suggested · Relational suggestion, not evidence.

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Sources

2 recorded citations, copied from the method source record.

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