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2014 Solving American Option Pricing Models by the Front Fixing Method: Numerical Analysis and Computing
R. Company, V. N. Egorova, L. Jódar
Abstr. Appl. Anal. 2014: 1-9 (2014). DOI: 10.1155/2014/146745

Abstract

This paper presents an explicit finite-difference method for nonlinear partial differential equation appearing as a transformed Black-Scholes equation for American put option under logarithmic front fixing transformation. Numerical analysis of the method is provided. The method preserves positivity and monotonicity of the numerical solution. Consistency and stability properties of the scheme are studied. Explicit calculations avoid iterative algorithms for solving nonlinear systems. Theoretical results are confirmed by numerical experiments. Comparison with other approaches shows that the proposed method is accurate and competitive.

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R. Company. V. N. Egorova. L. Jódar. "Solving American Option Pricing Models by the Front Fixing Method: Numerical Analysis and Computing." Abstr. Appl. Anal. 2014 1 - 9, 2014. https://doi.org/10.1155/2014/146745

Information

Published: 2014
First available in Project Euclid: 2 October 2014

zbMATH: 07021808
MathSciNet: MR3206768
Digital Object Identifier: 10.1155/2014/146745

Rights: Copyright © 2014 Hindawi

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