questions about pricing American Option in MC method

Posted by kangyin ye on
URL: http://quantlib.414.s1.nabble.com/questions-about-pricing-American-Option-in-MC-method-tp8081.html

Hi guys,

I found that the QuantLib MCAmericanEngine implement has a little different from the reference paper 

"Valuing American Options by Simulation: A Simple Least-Squares Approach". 

In AmericanPathPricer constructor, except the parabolic function a+bX+cX*X, the payoff function is also 

incorperated into basis function. I guess the author assume the additional one improves the accuracy of 

fitting the conditional expectation. 

Can anyone give more info about the consideration of adding payoff function. Thanks in advance!

ky

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