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

DOI10.1016/J.CAM.2008.12.018MaRDI QIDQ2390004zbMATH OpenOpenAlexWikidataFDO

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

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)

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Cited in

(24)

• Convergence Rate of an Explicit Finite Difference Scheme for a Credit Rating Migration Problem
• An implicit scheme for American put options
• An error estimate for the finite difference scheme for one-phase obstacle problem
• Numerical treatment to a non-local parabolic free boundary problem arising in financial bubbles
• Iterative scheme for an elliptic non-local free boundary problem
• Convergence of the finite difference scheme for a general class of the spatial segregation of reaction-diffusion systems
• On the integral relationship between the early exercise boundary and the value function of the American put option
• On modified Mellin transforms, Gauss-Laguerre quadrature, and the valuation of American call options
• Efficient pricing of Bermudan options using recombining quadratures
• A European option general first-order error formula
• An efficient and provable sequential quadratic programming method for American and swing option pricing
• The randomized American option as a classical solution to the penalized problem
• Pricing European and American options using a very fast and accurate scheme: the meshless local Petrov-Galerkin method
• Convergence rate of free boundary of numerical scheme for American option
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• 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 the convergence rate of the binomial tree scheme for an American option with jump-diffusion
• Can high-order convergence of European option prices be achieved with common CRR-type binomial trees?
• Option convergence rate with geometric random walks approximations
• scientific article; zbMATH DE number 2104606 (Why is no real title available?)
• Pricing real estate index options under stochastic interest rates
• On the acceleration of explicit finite difference methods for option pricing
• Pricing European and American options by radial basis point interpolation
• 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

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