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2013 A Simple Numerical Method for Pricing an American Put Option
Beom Jin Kim, Yong-Ki Ma, Hi Jun Choe
J. Appl. Math. 2013: 1-7 (2013). DOI: 10.1155/2013/128025

Abstract

We present a simple numerical method to find the optimal exercise boundary in an American put option. We formulate an intermediate function with the fixed free boundary that has Lipschitz character near optimal exercise boundary. Employing it, we can easily determine the optimal exercise boundary by solving a quadratic equation in time-recursive way. We also present several numerical results which illustrate a comparison to other methods.

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Beom Jin Kim. Yong-Ki Ma. Hi Jun Choe. "A Simple Numerical Method for Pricing an American Put Option." J. Appl. Math. 2013 1 - 7, 2013. https://doi.org/10.1155/2013/128025

Information

Published: 2013
First available in Project Euclid: 14 March 2014

zbMATH: 1266.91104
MathSciNet: MR3032266
Digital Object Identifier: 10.1155/2013/128025

Rights: Copyright © 2013 Hindawi

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