A Robust Spline Collocation Method for Pricing American Put Options

A Simple Numerical Method for Pricing an American Put Option

We present a simple numerical method to find the optimal exercise boundary in an American put option. We formulate an intermediate function with the fixed free boundary that has Lipschitz character near optimal exercise boundary. Employing it, we can easily determine the optimal exercise boundary by solving a quadratic equation in time-recursive way. We also present several numerical results wh...

An efficient finite element method for pricing American multi-asset put options

This paper is devoted to the valuation of American multi-asset put options. It is well known that the American multi-asset put option satisfies a linear complementary problem (LCP) on an unbounded domain. We consider a penalty method in which the LCP could be reformulated into a nonlinear parabolic problem on an unbounded domain. For the unbounded computational domain, a perfectly matched layer...

A stochastic mesh method for pricing high- dimensional American options

URL: www.thejournalofcomputationalfinance.com High-dimensional problems frequently arise in the pricing of derivative securities – for example, in pricing options on multiple underlying assets and in pricing term structure derivatives. American versions of these options, ie, where the owner has the right to exercise early, are particularly challenging to price. We introduce a stochastic mesh me...

A Quasi-radial Basis Functions Method for American Options Pricing

An Efficient Method for Pricing American Options for Jump Diffusions

We approximate the price of the American put for jump diffusions by a sequence of functions, which are computed iteratively. This sequence converges to the price function uniformly and exponentially fast. Each element of the approximating sequence solves an optimal stopping problem for geometric Brownian motion, and can be numerically constructed using the classical finite difference methods. W...