Front-Tracking Finite Difference Methods for the American Option Valuation Problem
نویسندگان
چکیده
TlWi paper is concerned with tILe numerical solution of the American option \la/nalion problem formulated as a parabolic free boundary/inilial value model. For this we introduce and analyze scveral front-tracking finite difference methods and compare I.hcm with the commonly used binomial and linear complementarity techniques. The numerical experiments performed indicate that the front-tracking methods considered are efficient alternatives for approximating simultaneously Ute option value and optimal exercise boundary functions associated with tile valuation problem.
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