Economics at your fingertips  

Pricing of American options, using the Brennan–Schwartz algorithm based on finite elements

Sofiane Madi, Mohamed Cherif Bouras, Mohamed Haiour and Andreas Stahel

Applied Mathematics and Computation, 2018, vol. 339, issue C, 846-852

Abstract: A finite element method and implicit time steps are used to determine the price of an American option. The algorithm of Brennan and Schwartz is adapted to this situation and we prove convergence. Numerical tests confirm the theoretical result and lead to a smaller error for the same computational effort, compared to the finite difference method.

Keywords: Finite element method; American option; Brennan–Schwartz; Parabolic variational inequalities (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this article

Applied Mathematics and Computation is currently edited by Theodore Simos

More articles in Applied Mathematics and Computation from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

Page updated 2018-12-08
Handle: RePEc:eee:apmaco:v:339:y:2018:i:c:p:846-852