Adaptive and high-order methods for valuing American options
نویسندگان
چکیده
منابع مشابه
Adaptive and high-order methods for valuing American options
We develop space-time adaptive and high-order methods for valuing American options using a partial differential equation (PDE) approach. The linear complementarity problem arising due to the free boundary is handled by a penalty method. Both finite difference and finite element methods are considered for the space discretization of the PDE, while classical finite differences, such as Crank-Nico...
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The convergence of a penalty method for solving the discrete regularized American option valuation problem is studied. Sufficient conditions are derived which both guarantee convergence of the nonlinear penalty iteration and ensure that the iterates converge monotonically to the solution. These conditions also ensure that the solution of the penalty problem is an approximate solution to the dis...
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The convergence of a penalty method for solving the discrete regularized American option valuation problem is studied. Sufficient conditions are derived which both guarantee convergence of the nonlinear penalty iteration and ensure that the iterates converge monotonically to the solution. These conditions also ensure that the solution of the penalty problem is an approximate solution to the dis...
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For European option we can obtain their exact values by using the so-called Black-Scholes formula, whereas there is no explicit exact solution for American counterparts despite that many researchers have attempted to obtain the solution. There have been many approximation methods developed for valuing American options, but they are not inclusive because they have both drawbacks and advantages w...
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ژورنال
عنوان ژورنال: The Journal of Computational Finance
سال: 2011
ISSN: 1460-1559
DOI: 10.21314/jcf.2011.232