The early exercise boundary for the American put near expiry: Numerical approximation (Q2713016)
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scientific article
| Language | Label | Description | Also known as |
|---|---|---|---|
| English | The early exercise boundary for the American put near expiry: Numerical approximation |
scientific article |
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18 February 2002
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American put
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free boundary problem
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early exercise boundary
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integral equation
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asymptotic solution
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numerical approximation
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The early exercise boundary for the American put near expiry: Numerical approximation (English)
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In the context of the classical geometric Brownian motion model, this paper derives an integral equation for the free boundary arising in the pricing of the American put option. This yields an accurate numerical procedure for the boundary near expiry and an analytical asymptotic approximation in terms of time to expiration. Comparisons with existing numerical results from the literature are given.
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