Convergence analysis of power penalty method for American bond option pricing

DOI10.1007/S10898-012-9843-1MaRDI QIDQ2393070zbMATH OpenOpenAlexFDO

Authors Kai Zhang, Kok Lay Teo

Publication date 7 August 2013

Published in Journal of Global Optimization (Search for Journal in Brave)

Full work available at URL https://doi.org/10.1007/s10898-012-9843-1

zbMATH Keywords

option pricingpenalty methodvariational inequalitiescomplementarity problem

Mathematics Subject Classification ID

Corporate finance (dividends, real options, etc.) (91G50) Complementarity and equilibrium problems and variational inequalities (finite dimensions) (aspects of mathematical programming) (90C33)

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Cites work

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• A theory of the term structure of interest rates
• Competition with open source as a public good
• Financial engineering, E-commerce and supply chain
• Generating interest rate scenarios for bank asset liability management
• Interest-rate option models: understanding, analysing and using models for exotic interest-rate options.
• Lagrange-type functions in constrained non-convex optimization.
• Power penalty method for a linear complementarity problem arising from American option valuation
• Quadratic convergence for valuing American options using a penalty method
• Semidefinite programming approaches for bounding Asian option prices

Cited in

(10)

• On convergence of a semi-analytical method for American option pricing
• Penalty approximation method for a double obstacle quasilinear parabolic variational inequality problem
• Applying a power penalty method to numerically pricing American bond options
• A power penalty approach to a mixed quasilinear elliptic complementarity problem
• Evaluating American put options on zero-coupon bonds by a penalty method
• Pricing American bond options using a penalty method
• Convergence analysis of a monotonic penalty method for American option pricing
• Convergence property of an interior penalty approach to pricing American option
• Pricing American bond options using a cubic spline collocation method
• On power penalty methods for linear complementarity problems arising from American option pricing

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