On modified Mellin transforms, Gauss-Laguerre quadrature, and the valuation of American call options (Q972768)

The main difficulty in valuing American options is the presence of the early exercise boundary. There is a large literature on numerical methods for American option pricing, comprising finite difference and element methods, penalty methods, binomial trees and simulation techniques. The purpose of this paper is to extend a framework suggested by \textit{R. Panini} and \textit{R. P. Srivastav} [Math. Comput. Modelling 40, No. 1--2, 43--56 (2004; Zbl 1112.91037)], and develop a new method for characterizing American call option prices and exercise boundaries using a modified version of the Mellin transform.