Approximation of the free boundary of an American call option by finite differences on parallelograms

DOI10.12732/IJAM.V28I6.4MaRDI QIDQ5740967zbMATH OpenOpenAlexFDO

Authors Juan C. Aguilar

Publication date 20 July 2016

Published in International Journal of Apllied Mathematics (Search for Journal in Brave)

Full work available at URL https://doi.org/10.12732/ijam.v28i6.4

zbMATH Keywords

free boundaryNewton's methodAmerican call optionfinite differencesBlack-Scholes equationCrank-Nicolson discretization method

Mathematics Subject Classification ID

Derivative securities (option pricing, hedging, etc.) (91G20) Numerical methods (including Monte Carlo methods) (91G60) Finite difference methods for initial value and initial-boundary value problems involving PDEs (65M06) Numerical methods for inverse problems for initial value and initial-boundary value problems involving PDEs (65M32)

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(4)

• Finite-difference bisection algorithms for free boundaries of American options
• Finite difference schemes of pricing for American call options with free and moving boundary value
• Direct computation for American put option and free boundary using finite difference method
• Estimation of error in finite-difference bisection algorithm of American options

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