Operator splitting methods for American option pricing.

DOI10.1016/J.AML.2004.06.010zbMath1063.65081OpenAlexW2084083490MaRDI QIDQ1767129

Jari Toivanen, Samuli Ikonen

Publication date: 7 March 2005

Published in: Applied Mathematics Letters (Search for Journal in Brave)

Full work available at URL: https://doi.org/10.1016/j.aml.2004.06.010

zbMATH Keywords

comparison of methodslinear complementarity problemnumerical experimentssuccessive overrelaxationbackward differentiation formulapricingCrank-Nicolson methodBlack-Scholes equationtime discretizationAmerican optionoperator splitting methodcentral finite-difference scheme

Mathematics Subject Classification ID

Numerical methods (including Monte Carlo methods) (91G60) Complementarity and equilibrium problems and variational inequalities (finite dimensions) (aspects of mathematical programming) (90C33) 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) Initial value problems for second-order parabolic equations (35K15)

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Uses Software

• RODAS

Cites Work

• Unnamed Item
• Unnamed Item
• The Pricing of Options and Corporate Liabilities
• Lectures on numerical methods for non-linear variational problems
• On multigrid for linear complementarity problems with application to American-style options
• Far Field Boundary Conditions for Black--Scholes Equations
• Some mathematical results in the pricing of American options
• Convergence Analysis of a Finite Element Projection/Lagrange--Galerkin Method for the Incompressible Navier--Stokes Equations
• The Solution of a Quadratic Programming Problem Using Systematic Overrelaxation

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