Numerical performance of penalty method for American option pricing
نویسندگان
چکیده
منابع مشابه
Finite Element Method for American Option Pricing: a Penalty Approach
The model for pricing of American option gives rise to a parabolic variational inequality. We first use penalty function approach to reformulate it as an equality problem. Since the problem is defined on an unbounded domain, we truncate it to a bounded domain and discuss error due to truncation and penalization. Finite element method is then applied to the penalized problem on the truncated dom...
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ژورنال
عنوان ژورنال: Optimization Methods and Software
سال: 2010
ISSN: 1055-6788,1029-4937
DOI: 10.1080/10556780903051930