Modulus-based successive overrelaxation iteration method for pricing American options with the two-asset Black-Scholes and Heston's models based on finite volume discretization
type: Item
instance of: scholarly article
title: Modulus-based successive overrelaxation iteration method for pricing American options with the two-asset Black-Scholes and Heston's models based on finite volume discretization
zbMATH Open document ID: 1484.91516
author: Xiao-Ting Gan
author: Dengguo Xu
author: Xiaolin Chen
published in: Taiwanese Journal of Mathematics
publication date: 2022-02-28T00:00:00Z
review text: In this paper, two fully discrete finite volume methods (FVMs) are studies for pricing the two-asset Black-Scholes and Heston's stochastic volatility American options models. Based on barycenter dual partition, one semi-discrete and two fully discrete backward Euler and Crank-Nicolson FVMs are developed. The linear complementary problems (LCPs) arising from American options pricing are solved with the modulus-based matrix splitting (MSOR) iteration methods, e.g. MSOR method coupled with the FVM. Numerical experiments confirm that MSOR method is more efficient and robust than the classical projected successive overrelaxation (PSOR) method.
Mathematics Subject Classification ID: 91G60
Mathematics Subject Classification ID: 65M08
Mathematics Subject Classification ID: 65M06
Mathematics Subject Classification ID: 65F10
Mathematics Subject Classification ID: 91G20
Mathematics Subject Classification ID: 60G40
Mathematics Subject Classification ID: 35R60
zbMATH DE Number: 7481703
zbMATH Keywords: option pricing, finite volume methods, Heston's model, Block-Scholes, American options
reviewed by: Bülent Karasözen
MaRDI profile type: Publication
Wikidata QID: Q113267894
full work available at URL: https://doi.org/10.11650/tjm/210803
OpenAlex ID: W3197704575
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DOI: 10.11650/TJM/210803
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