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BERMUDAN OPTION

Bermudan Option is an option contract where the buyer has the right to exercise at a pre-set number of times. The exercise times are always discretely spaced. In its payoff structure, Bermudan option falls somewhere between European option (exercise allowed at expiry) and American option (exercise allowed on any day).


BERMUDAN OPTION REFERENCES

Longstaff, F. A., & Schwartz, E. S. (2001). Valuing American Options by Simulation: A Simple Least-Squares Approach. Review of Financial Studies vol. 14.

Hull, J. (2011). Options, Futures, and Other Derivatives (8th ed). Pearson / Prentice Hall.

Lipton, A. (2001). Mathematical Methods for Foreign Exchange: A Financial Engineer's Approach. World Scientific.

Bouzoubaa, M. (2010). Exotic Options and Hybrids: A Guide to Structuring, Pricing and Trading. Wiley.

Nelken, I., ed (1996). The Handbook of Exotic Options: Instruments, Analysis and Applications. McGraw-Hill.

Taleb, N. (1997). Dynamic Hedging: Managing Vanilla and Exotic Options. Wiley Finance, New York.

Huang, S., & Guo, M. (2008). Valuation of Multidimensional Bermudan Options. Applied Quantitative Finance (book), Part III, pp. 295-309. Springer-Verlag Berlin Heidelberg.

Belomestny, D., Dickmann, F., & Nagapetyan, T. (2015). Pricing Bermudan Options via Multilevel Approximation Methods. SIAM J. Finan. Math., 6(1), pp. 448–466.

Rogers, L. C. G. (2010). Dual Valuation and Hedging of Bermudan Options. SIAM J. Finan. Math., 1(1), pp. 604–608.
 


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