Optimal convergence rate of the explicit finite difference scheme for American option valuation

DOI10.1016/J.CAM.2008.12.018zbMATH Open1175.91180OpenAlexW2068573648WikidataQ116009526 ScholiaQ116009526MaRDI QIDQ2390004FDOQ2390004

Authors: Bei Hu, Jin Liang, Lishang Jiang 

Publication date: 20 July 2009

Published in: Journal of Computational and Applied Mathematics (Search for Journal in Brave)

Full work available at URL: https://doi.org/10.1016/j.cam.2008.12.018

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zbMATH Keywords

American put optionexplicit finite difference schemebinomial tree method

Mathematics Subject Classification ID

Derivative securities (option pricing, hedging, etc.) (91G20) Stochastic ordinary differential equations (aspects of stochastic analysis) (60H10) Initial value problems for second-order parabolic equations (35K15) Microeconomic theory (price theory and economic markets) (91B24)

Cites Work

• The pricing of options and corporate liabilities
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Cited In (24)

• On the integral relationship between the early exercise boundary and the value function of the American put option
• Numerical treatment to a non-local parabolic free boundary problem arising in financial bubbles
• Title not available (Why is that?)
• Convergence of the finite difference scheme for a general class of the spatial segregation of reaction-diffusion systems
• An efficient and provable sequential quadratic programming method for American and swing option pricing
• Pricing European and American options using a very fast and accurate scheme: the meshless local Petrov-Galerkin method
• Local weak form meshless techniques based on the radial point interpolation (RPI) method and local boundary integral equation (LBIE) method to evaluate European and American options
• On modified Mellin transforms, Gauss-Laguerre quadrature, and the valuation of American call options
• A European option general first-order error formula
• Title not available (Why is that?)
• Convergence rate of free boundary of numerical scheme for American option
• Option convergence rate with geometric random walks approximations
• On the acceleration of explicit finite difference methods for option pricing
• Pricing real estate index options under stochastic interest rates
• On the convergence rate of the binomial tree scheme for an American option with jump-diffusion
• An error estimate for the finite difference scheme for one-phase obstacle problem
• The randomized American option as a classical solution to the penalized problem
• Pricing European and American options by radial basis point interpolation
• An implicit scheme for American put options
• An Error Analysis of a Finite Element Method with IMEX-Time Semidiscretizations for Some Partial Integro-differential Inequalities Arising in the Pricing of American Options
• Efficient pricing of Bermudan options using recombining quadratures
• Can high-order convergence of European option prices be achieved with common CRR-type binomial trees?
• Convergence Rate of an Explicit Finite Difference Scheme for a Credit Rating Migration Problem
• Iterative scheme for an elliptic non-local free boundary problem

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