How to speed up the quantization tree algorithm with an application to swing options

TitleHow to speed up the quantization tree algorithm with an application to swing options
Publication TypeJournal Article
Year of Publication2008
AuthorsAnne Laure Bronstein, Gilles Pagès, and Benedikt Wilbertz
KeywordsBackward Dynamic programming, Gaussian process, Lévy process, quantization, Stochastic control, Swing options
Abstract

In this paper, we suggest several improvements to the numerical implementation of the quantization method for stochastic control problems in order to get fast and accurate premium estimations. This technique is applied to derivative pricing in energy markets. Several ways of modeling energy derivatives are described and finally numerical examples including parallel execution on multi-processor devices are presented to illustrate the accuracy of these methods and their execution times.