Numerical Method for American Option Pricing under the Time-Fractional Black–Scholes Model

The fractional Black–Scholes model has had limited applications in financial markets. Instead, the time-fractional equation attracted much research interest. However, it is difficult to obtain analytic expression for American option pricing under model. This paper will present an operator-splitting method price options partial differential complementarity problem (FPDCP) that satisfied split into two subproblems: a linear boundary value and algebraic system. A high-order compact (HOC) scheme grid stretching (GS) are considered problem. Furthermore, numerical results show HOC with GS gives accurate solution