Finite difference methods for pricing American put option with rationality parameter: numerical analysis and computing

DOI10.1016/J.CAM.2016.03.001zbMath1349.65280OpenAlexW2296685868MaRDI QIDQ273385

Rafael Company, Carlos Vázquez, Vera N. Egorova, Lucas Jodar

Publication date: 22 April 2016

Published in: Journal of Computational and Applied Mathematics (Search for Journal in Brave)

Full work available at URL: https://doi.org/10.1016/j.cam.2016.03.001

zbMATH Keywords

finite difference methodAmerican optionsnumerical analysisirrational exercisenonlinear Black-Scholes equations

Mathematics Subject Classification ID

Finite difference methods for initial value and initial-boundary value problems involving PDEs (65M06) Stability and convergence of numerical methods for initial value and initial-boundary value problems involving PDEs (65M12) Stopping times; optimal stopping problems; gambling theory (60G40) Financial applications of other theories (91G80) Derivative securities (option pricing, hedging, etc.) (91G20) Computational methods for stochastic equations (aspects of stochastic analysis) (60H35) Numerical solutions to stochastic differential and integral equations (65C30)

Related Items (11)

Partial differential integral equation model for pricing American option under multi state regime switching with jumps ⋮ Efficient numerical pricing of American options based on multiple shooting method: a PDE approach ⋮ Two‐dimensional Haar wavelet based approximation technique to study the sensitivities of the price of an option ⋮ Convergence analysis of finite element method for a parabolic obstacle problem ⋮ An ETD method for multi‐asset American option pricing under jump‐diffusion model ⋮ A wavelet‐based novel approximation to investigate the sensitivities of various path‐independent binary options ⋮ An efficient numerical method for the valuation of American multi-asset options ⋮ Computing American option price under regime switching with rationality parameter ⋮ Pricing options under stochastic volatility jump model: a stable adaptive scheme ⋮ Conditional full stability of positivity-preserving finite difference scheme for diffusion-advection-reaction models ⋮ An improved Barone-Adesi Whaley formula for turbulent markets

Cites Work

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• A Fast Numerical Method for the Black--Scholes Equation of American Options
• Binomial models for option valuation - examining and improving convergence

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