Application of the singularity-separating method to American exotic option pricing (Q1871996)

It is known that the European down-and-out call option can be evaluated (solved) by solving a partial differential equation (PDE) with two boundary conditions. Indeed, the value of such an option can be represented in closed form. This paper develops a solution technique for the corresponding American option. Although no closed form solution to the resulting PDE exists, the option value is computable and some computational results are included.