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Optimal Delaunay and Voronoi quantization schemes for pricing American style options.

TitleOptimal Delaunay and Voronoi quantization schemes for pricing American style options.
Publication TypeJournal Article
Year of Publication2011
AuthorsGilles Pagès, and Benedikt Wilbertz
KeywordsAmerican option, Delaunay triangulation, optimal vector quantization, quantization tree, Voronoi diagram
Abstract

We review in this article pure quantization methods for the pricing of multiple exercise options. These quantization methods have the common advantage, that they allow a straightforward implementation of the Backward Dynamic Programming Principle for optimal stopping and stochastic control problems. Moreover we present here for the first time a unified discussion of this topic for Voronoi and Delaunay quantization and illustrate the performances of both methods by several numerical examples.