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Tagged with american-options finite-difference-method
7 questions
4
votes
2
answers
262
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Convergence rate of Bermudan to American option
When trying to value an American option we often use grid-based methods (e.g. Monte Carlo in combination with Longstaff Schwartz; or Finite Difference Methods). As such, we are in fact estimating the ...
- 568
2
votes
1
answer
155
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Finite difference methods for (continuously) strike-resettable American options
For simplicity, let us consider an American call/put with a continuously resettable strike price. Current time is $t=0$, maturity is at $t=T$, and the initial strike is $K_0$. We consider a "...
- 913
2
votes
0
answers
165
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American-Bermudan-Asian option fixed strike using finite differences
I'm trying to price the same American-Bermudan-Asian option described in Longstaff Schwartz (2001). Specifically, using finite difference methods with an explicit scheme to solve
$\begin{aligned}
\...
- 359
2
votes
1
answer
1k
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Brennan-Schwartz algorithm for pricing American options
I'm reading Pricing American Options using LU decomposition by Ikonen and
Toivanen (IT).
They reference The valuation of American put options by Brennan and Schwartz, and cast it as method that uses ...
- 525
1
vote
1
answer
485
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Pricing an American derivative with finite differences
I have a basic fundamental question on pricing an American option in the Black-Scholes (BS) framework: I seem to confuse two different approaches to price any early exercise,
Write down a linear ...
- 503
1
vote
2
answers
891
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Full value function of an American option with QuantLib FD
I am looking at the Equity Option example of QuantLib:
http://quantlib.org/reference/_equity_option_8cpp-example.html
and more particularly the FDAmericanEngine. However, I am not interested in the ...
2
votes
1
answer
638
views
pricing american put option with fdm
Assume I use some finite difference solver to solve for American type of exercise in BS framework where stock pays dividend discretely. Then at every time iteration, for call option, I firstly adjust ...
- 503