The Acceleration of Least Squares Monte Carlo in Risk Management

Abstract

The Least Squares Monte Carlo (LSMC) method was first proposed by Longstaff and Schwartz [1] to price the American option, since then it has been applied in different industries from banking [2] to energy sector [3]. In the last decade, there is an increasing demand for sophisticated risk modeling [4]. To overcome the computational complexity of those models, the proxy techniques have gain popularity in both risk management practice and research over the last decade [5].