Numerical performance of penalty method for American option pricing

DOI10.1080/10556780903051930zbMath1197.91189OpenAlexW1984152776WikidataQ59416183 ScholiaQ59416183MaRDI QIDQ3161139

Kai Zhang, Songgui Wang, Xiao Qi Yang, Kok Lay Teo

Publication date: 12 October 2010

Published in: Optimization Methods and Software (Search for Journal in Brave)

Full work available at URL: http://hdl.handle.net/20.500.11937/17748

zbMATH Keywords

finite volume methodoption pricingpenalty methodcomplementarity problem

Mathematics Subject Classification ID

Numerical methods (including Monte Carlo methods) (91G60) Stability and convergence of numerical methods for initial value and initial-boundary value problems involving PDEs (65M12) Derivative securities (option pricing, hedging, etc.) (91G20) Finite element, Rayleigh-Ritz and Galerkin methods for initial value and initial-boundary value problems involving PDEs (65M60)

Related Items (7)

A power penalty method for discrete HJB equations ⋮ A power penalty method for a 2D fractional partial differential linear complementarity problem governing two-asset American option pricing ⋮ On power penalty methods for linear complementarity problems arising from American option pricing ⋮ Power penalty method for solving HJB equations arising from finance ⋮ Penalty method for indifference pricing of American option in a liquidity switching market ⋮ An unconstrained differentiable penalty method for implicit complementarity problems ⋮ Solution method for discrete double obstacle problems based on a power penalty approach

Cites Work

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• A fitted finite volume method for the valuation of options on assets with stochastic volatilities
• Quadratic Convergence for Valuing American Options Using a Penalty Method
• A novel fitted finite volume method for the Black-Scholes equation governing option pricing
• Decreasing Functions with Applications to Penalization
• Option pricing: A simplified approach

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