Pricing multi-asset American options: A finite element method-of-Lines with smooth penalty

DOI10.1007/s10915-007-9150-zzbMath1210.91133OpenAlexW2066349460MaRDI QIDQ2465446

Pavlo Kovalov, Michael D. Marcozzi, Vadim Linetsky

Publication date: 4 January 2008

Published in: Journal of Scientific Computing (Search for Journal in Brave)

Full work available at URL: https://doi.org/10.1007/s10915-007-9150-z

zbMATH Keywords

Finite element methodVariational inequalityPenalty methodOption pricing

Mathematics Subject Classification ID

Numerical methods (including Monte Carlo methods) (91G60) Derivative securities (option pricing, hedging, etc.) (91G20)

Related Items (21)

Option pricing under the jump diffusion and multifactor stochastic processes ⋮ A general continuous time Markov chain approximation for multi-asset option pricing with systems of correlated diffusions ⋮ A penalty method for American multi-asset option problems ⋮ An improved least squares Monte Carlo valuation method based on heteroscedasticity ⋮ An efficient finite element method for pricing American multi-asset put options ⋮ An efficient numerical method for the valuation of American multi-asset options ⋮ Asset liquidity and the valuation of derivative securities ⋮ Improved numerical solution of multi-asset option pricing problem: a localized RBF-FD approach ⋮ Modified Barrier Penalization Method for Pricing American Options ⋮ Pricing multi-asset option problems: a Chebyshev pseudo-spectral method ⋮ A two-grid penalty method for American options ⋮ An RBF-FD sparse scheme to simulate high-dimensional Black-Scholes partial differential equations ⋮ Representations for conditional expectations and applications to pricing and hedging of financial products in Lévy and jump-diffusion setting ⋮ On the valuation of interest rate products under multi-factor HJM term-structures ⋮ Penalty method for indifference pricing of American option in a liquidity switching market ⋮ Implied stopping rules for American basket options from Markovian projection ⋮ Generic improvements to least squares Monte Carlo methods with applications to optimal stopping problems ⋮ 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 ⋮ Many-server queues with customer abandonment: numerical analysis of their diffusion models ⋮ A computationally efficient state-space partitioning approach to pricing high-dimensional American options via dimension reduction ⋮ A finite volume–alternating direction implicit method for the valuation of American options under the Heston model

Uses Software

• SUNDIALS

Cites Work

• SUNDIALS
• The valuation of foreign currency options under stochastic interest rates
• A numerical analysis of variational valuation techniques for derivative securities
• Variational inequalities and the pricing of American options
• On the theory of option pricing
• Galerkin finite element methods for parabolic problems
• On the pricing of American options
• Penalty methods for American options with stochastic volatility
• On the use of boundary conditions for variational formulations arising in financial mathematics.
• A penalty method for American options with jump diffusion processes
• Far Field Boundary Conditions for Black--Scholes Equations
• On the Approximation of Optimal Stopping Problems with Application to Financial Mathematics
• Quadratic Convergence for Valuing American Options Using a Penalty Method
• Valuing Asian and Portfolio Options by Conditioning on the Geometric Mean Price
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