Explain how Monte Carlo methods can be used to price options. You are expected to critically compare
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Question:
Explain how Monte Carlo methods can be used to price options. You are expected to critically compare Monte Carlo methods with alternative approaches and to show how Monte Carlo links with the Feyman Kac theorem.
Explain and critically discuss:
The Longstaff and Schwartz (2001) (LS) method for pricing American options.
The difference between the LS method and the Glasserman and Yu (2004) method. (25%)
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