# Monte Carlo American Options Discrete Dividends

Built some tree methods to price american options with discrete dividends. But I have no way to really verify my work. Questions below:

1. Does it make sense to build a Monte Carlo pricer to use as a benchmark to measure the results of the trees against.
2. What is the best way to build such a Monte Carlo pricer for american options with discrete dividends ?

• Why build your own when there are so many existing ones online? – Brian B Dec 1 '20 at 16:05
• I second @BrianB : validate against an outside view, e.g. QuantLib. I think it should be able to consider discrete dividends ... – Kermittfrog Dec 1 '20 at 16:19
• Thanks @BrianB but who has one that i can use for discrete divs ? – JBerstein Dec 1 '20 at 16:46
• Could this help: quant.stackexchange.com/questions/37237/… – Kermittfrog Dec 1 '20 at 17:40
• @Kermittfrog Yes that would be very helpful; only the code presented in that post has a constructor error and does not work despite the author saying he fixed it. I can't seem to debug it; might post about that. – JBerstein Dec 1 '20 at 20:40

Monte Carlo is a forward-simulation method, whereas trees propagate backwards. This is a problem for valuing American options: at every timestep you have to take the $$max()$$ of the payoff and the current option price - but you don't know the option price.