A fast numerical method for the Black-Scholes equation of American options

被引：71
|
作者：
Han, H [1 ]
Wu, XN
机构：
[1] Tsing Hua Univ, Dept Math Sci, Beijing 100084, Peoples R China
[2] Hong Kong Baptist Univ, Dept Math, Kowloon, Hong Kong, Peoples R China
来源：
SIAM JOURNAL ON NUMERICAL ANALYSIS | 2003年 / 41卷 / 06期
关键词：
American option; free boundary; artificial boundary condition; finite difference method;
D O I：
10.1137/S0036142901390238
中图分类号：
O29 [应用数学];
学科分类号：
070104 ;
摘要：
This paper introduces a fast numerical method for computing American option pricing problems governed by the Black-Scholes equation. The treatment of the free boundary is based on some properties of the solution of the Black-Scholes equation. An artificial boundary condition is also used at the other end of the domain. The finite difference method is used to solve the resulting problem. Computational results are given for some American call option problems. The results show that the new treatment is very efficient and gives better accuracy than the normal finite difference method.
引用
收藏
页码：2081 / 2095
页数：15
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