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Based on a duality approach for Monte Carlo construction of upper bounds for American/Bermudan derivatives (Rogers, Haugh & Kogan), we present a new algorithm for computing dual upper bounds in a more efficient way. The method is applied to Bermudan swaptions in the context of a LIBOR market model, where the dual upper bound is constructed from the maximum of still alive swaptions. We give a numerical comparison with Andersen's lower bound method.
Published Online: 2008-05-09
Published in Print: 2004-12
© de Gruyter 2004
