Optimal quantization for the pricing of swing options

TL;DR

This paper presents a numerical algorithm based on optimal quantization for pricing swing options, demonstrating its efficiency through detailed simulations and comparison with the Longstaff-Schwartz method.

Contribution

It introduces a novel application of optimal quantization to swing option pricing and compares its performance with existing algorithms.

Findings

Optimal quantization provides an efficient method for swing option pricing.

The proposed algorithm outperforms the Longstaff-Schwartz method in simulations.

Numerical results confirm the accuracy and computational advantages of the new approach.

Abstract

In this paper, we investigate a numerical algorithm for the pricing of swing options, relying on the so-called optimal quantization method. The numerical procedure is described in details and numerous simulations are provided to assert its efficiency. In particular, we carry out a comparison with the Longstaff-Schwartz algorithm.