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Mar 10, 2018 at 15:30 vote accept AlexAbrahams
Mar 10, 2018 at 15:21 history edited AlexAbrahams CC BY-SA 3.0
Updated code according to answer
Mar 10, 2018 at 14:16 answer added Yian Pap timeline score: 5
Mar 9, 2018 at 21:39 comment added Ivan Where payoff < continuation_value you should use that and not value(t+1)
Mar 9, 2018 at 21:01 comment added Bob Jansen I didn't copy all your changes but when I set sim = 5 ** 5 I see prices both below and above. Maybe convergence is the issue?
Mar 9, 2018 at 20:18 comment added AlexAbrahams @BobJansen Thanks for your comment. Sorry about that, I have retested and updated the code which returns put ~10 call~21 using Python 3.6. The polyfit warning is due to the degree of the fitted polynomial being quite high, if this is lowered (now 6) there's no warning.
Mar 9, 2018 at 20:17 comment added Bob Jansen I needed t = float((expiry_date - valuation_date) / 365) to get non-integer time steps. Now it runs and I see overestimation of the call value.
Mar 9, 2018 at 20:13 history edited AlexAbrahams CC BY-SA 3.0
Updated code
Mar 9, 2018 at 19:54 comment added Bob Jansen When I run this code, I get warnings: 53: RankWarning: Polyfit may be poorly conditioned regression = np.polyfit(GBM[t, :], value_matrix[t + 1, :] * discount, 8) and LSMC call price is 10 while put is 0.
Mar 9, 2018 at 19:42 history tweeted twitter.com/StackQuant/status/972195997194563584
Mar 9, 2018 at 18:03 history edited AlexAbrahams CC BY-SA 3.0
deleted 1 character in body
Mar 9, 2018 at 17:54 history edited AlexAbrahams CC BY-SA 3.0
deleted 11 characters in body
Mar 9, 2018 at 14:59 history asked AlexAbrahams CC BY-SA 3.0