.. _sphx_glr_api_gallery_exotic_options_american:

American options by simulation
------------------------------

Longstaff and Schwartz's least-squares Monte Carlo for early exercise.


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    <div class="sphx-glr-thumbcontainer" tooltip="Monte Carlo simulates forward, but early exercise is decided backward: whether to exercise today depends on the value of waiting. Francis Longstaff and Eduardo Schwartz (2001) estimated that continuation value by regressing the discounted future cash flows of the in-the-money paths on a few functions of today&#x27;s price. Working back from expiry, each path is exercised where the payoff beats the fitted value. The method extends to many assets and path-dependent payoffs, where trees and PDEs give up.">

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  .. image:: /api/gallery/exotic_options/american/images/thumb/sphx_glr_plot_01_longstaff_schwartz_thumb.png
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  :doc:`/api/gallery/exotic_options/american/plot_01_longstaff_schwartz`

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      <div class="sphx-glr-thumbnail-title">Longstaff-Schwartz least-squares Monte Carlo</div>
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   /api/gallery/exotic_options/american/plot_01_longstaff_schwartz