Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/258043 
Year of Publication: 
2020
Citation: 
[Journal:] Risks [ISSN:] 2227-9091 [Volume:] 8 [Issue:] 3 [Article No.:] 90 [Publisher:] MDPI [Place:] Basel [Year:] 2020 [Pages:] 1-19
Publisher: 
MDPI, Basel
Abstract: 
In this work, we adapt a Monte Carlo algorithm introduced by Broadie and Glasserman in 1997 to price a Û-option. This method is based on the simulated price tree that comes from discretization and replication of possible trajectories of the underlying asset's price. As a result, this algorithm produces the lower and the upper bounds that converge to the true price with the increasing depth of the tree. Under specific parametrization, this Û-option is related to relative maximum drawdown and can be used in the real market environment to protect a portfolio against volatile and unexpected price drops. We also provide some numerical analysis.
Subjects: 
Û-option
American-type option
optimal stopping
Monte Carlo simulation
JEL: 
G13
C61
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article
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