Multigrid for American option pricing with stochastic volatility

Nigel Clarke and Kevin Parrott

Applied Mathematical Finance, 1999, vol. 6, issue 3, 177-195

Abstract: The paper describes an implicit finite difference approach to the pricing of American options on assets with a stochastic volatility. A multigrid procedure is described for the fast iterative solution of the discrete linear complementarity problems that result. The accuracy and performance of this approach is improved considerably by a strike-price related analytic transformation of asset prices and adaptive time-stepping.

Keywords: American Option Pricing; Stochastic Volatility; Finite Difference Method; Multigrid; Strike-price Related Transformation; Adaptive Time-stepping (search for similar items in EconPapers)
Date: 1999
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Citations: View citations in EconPapers (38)

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DOI: 10.1080/135048699334528

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