ADI Schemes for Pricing American Options under the Heston Model

Tinne Haentjens and Karel J. in 't Hout

Applied Mathematical Finance, 2015, vol. 22, issue 3, 207-237

Abstract: In this article, a simple, effective adaptation of Alternating Direction Implicit time discretization schemes is proposed for the numerical pricing of American-style options under the Heston model via a partial differential complementarity problem. The stability and convergence of the new methods are extensively investigated in actual, challenging applications. In addition, a relevant theoretical result is proved.

Date: 2015
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DOI: 10.1080/1350486X.2015.1009129

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