Convergence of the Binomial Tree Method for American Options in a Jump-Diffusion Model

DOI10.1137/S0036142902409744zbMath1146.91337OpenAlexW2025094362MaRDI QIDQ4653939

Baojun Bian, Xiao-Song Qian, Cheng-long Xu, Li-Shang Jiang

Publication date: 1 March 2005

Published in: SIAM Journal on Numerical Analysis (Search for Journal in Brave)

Full work available at URL: https://doi.org/10.1137/s0036142902409744

zbMATH Keywords

viscosity solutionintegro-differential equationAmerican optionjump-diffusion modelbinomial tree methodexplicit difference method

Mathematics Subject Classification ID

Numerical methods (including Monte Carlo methods) (91G60) Monte Carlo methods (65C05) Finite difference methods for initial value and initial-boundary value problems involving PDEs (65M06) Stopping times; optimal stopping problems; gambling theory (60G40) Derivative securities (option pricing, hedging, etc.) (91G20) Viscosity solutions to Hamilton-Jacobi equations in optimal control and differential games (49L25)

Related Items (8)

Convergence rate of free boundary of numerical scheme for American option ⋮ Convergence of the binomial tree method for Asian options in jump-diffusion models ⋮ A mathematical modeling for the lookback option with jump-diffusion using binomial tree method ⋮ Smooth convergence in the binomial model ⋮ Unnamed Item ⋮ Analytical binomial lookback options with double-exponential jumps ⋮ Stochastic approximation methods for American type options ⋮ Pricing jump risk with utility indifference

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