Application of the singularity-separating method to American exotic option pricing (Q1871996)
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English | Application of the singularity-separating method to American exotic option pricing |
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Application of the singularity-separating method to American exotic option pricing (English)
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4 May 2003
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It is known that the European down-and-out call option can be evaluated (solved) by solving a partial differential equation (PDE) with two boundary conditions. Indeed, the value of such an option can be represented in closed form. This paper develops a solution technique for the corresponding American option. Although no closed form solution to the resulting PDE exists, the option value is computable and some computational results are included.
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computational finance
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finite difference methods
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American option pricing
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European option
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