The Longstaff-Schwarz method described in “Valuing American Options by Simulation: A Simple Least Squares Approach” by Francis A. Longstaff and Eduardo S. Schwartz allows valuation of non-European options to a reasonable degree of accuracy using simulations and a clever way to choose between early exercise of the option or continuation. I’ve implemented in Python and put the code on GitHub. After installing the requirements from requirements.txt it should be easy to run the below code in a Jupyter notebook and get results quite close to those presented in the original paper.
Month: April 2019
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