Penalty methods for American options with stochastic volatility
نویسندگان
چکیده
منابع مشابه
Operator Splitting Methods for Pricing American Options with Stochastic Volatility
Stochastic volatility models lead to more realistic option prices than the Black-Scholes model which uses a constant volatility. Based on such models a two-dimensional parabolic partial differential equation can derived for option prices. Due to the early exercise possibility of American option contracts the arising pricing problems are free boundary problems. In this paper we consider the nume...
متن کاملOperator Splitting Methods for American Options with Stochastic Volatility
Abstract. Option pricing models with a stochastic volatility are more realistic than the Black-Scholes model which uses a constant volatility. The prices of options based on such models can be obtained by solving a parabolic partial differential equation. Particularly, we consider the model presented by Heston. The variables in these problems are the time, the underlying asset value, and the vo...
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Five numerical methods for pricing American put options under Heston’s stochastic volatility model are described and compared. The option prices are obtained as the solution of a two-dimensional parabolic partial differential inequality. A finite difference discretization on nonuniform grids leading to linear complementarity problems with M -matrices is proposed. The projected SOR, a projected ...
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We consider the numerical pricing of American options under Heston’s stochastic volatility model. The price is given by a linear complementarity problem with a two-dimensional parabolic partial differential operator. We propose operator splitting methods for performing time stepping after a finite difference space discretization. The idea is to decouple the treatment of the early exercise const...
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Efficient numerical methods for pricing American options using Heston’s stochastic volatility model is proposed. Based on this model the price of a European option can be obtained by solving a two-dimensional parabolic partial differential equation. For an American option the early exercise possibility leads to a lower bound for the price of the option. This price can be computed by solving a l...
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ژورنال
عنوان ژورنال: Journal of Computational and Applied Mathematics
سال: 1998
ISSN: 0377-0427
DOI: 10.1016/s0377-0427(98)00037-5