Comparative study of the direct and inverse finite element methods for pricing American options
نویسندگان
چکیده
منابع مشابه
Pricing American Options by the Finite Element Method
In this paper we investigate the performances of high-order of finite element methods for American option pricing. First of all, the partial differential problem that yields the price of American options, which is a free boundary problem, is transformed to a problem with a fixed boundary by adding a suitable penalty term. Then, by employing a quadratic finite element method, a nonlinear system ...
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We analyze a number of techniques for pricing American options under a regime 4 switching stochastic process. The techniques analyzed include both explicit and implicit discretiza5 tions with the focus being on methods which are unconditionally stable. In the case of implicit 6 methods we also compare a number of iterative procedures for solving the associated nonlinear al7 gebraic equations. N...
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The finite element method is well suited to the numerical solution of the partial differential equations arising in finance because they allow for a posteriori error estimates and mesh adaptivity. The method will be described on three simple examples and its advantages will be emphasized.
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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...
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ژورنال
عنوان ژورنال: African Journal of Mathematics and Computer Science Research
سال: 2019
ISSN: 2006-9731
DOI: 10.5897/ajmcsr2018.0754