A semilinear equation for the American option in a general jump market (Q846248)
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scientific article; zbMATH DE number 5665698
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| English | A semilinear equation for the American option in a general jump market |
scientific article; zbMATH DE number 5665698 |
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A semilinear equation for the American option in a general jump market (English)
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2 February 2010
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The authors study the pricing of American put and call options in a market with jumps. They characterize the price as a solution of an integro-differential equation set on the whole domain which involves an additional reaction term that depends on the American option value in a nonlinear, nonlocal and discontinuous manner. To do this they give a proper definition of a viscosity solution of the equation and show that the characterization is well posed. Their main goal is to design and analyze ``easy to implement'' numerical algorithms for computing the value of an American option.
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American options
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integro-differential equation
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viscosity solutions
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strong comparison principle
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0.8461402058601379
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0.8262763619422913
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0.8241706490516663
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