A ‘moving index’ method for the solution of the American options valuation problem

M.d Koulisianis and T.s Papatheodorou

Mathematics and Computers in Simulation (MATCOM), 2000, vol. 54, issue 4, 373-381

Abstract: We introduce a new technique for the solution of the American options valuation problem, which resembles the moving boundary behavior of the solution, and thus, we call it the ‘moving index’ (MI) method. We use the so-called linear complementarity formulation of the problem for which projected successive over relaxation (PSOR) is a leading and well-known method. We report on experimental results, which demonstrate that our MI method presents dramatic improvements over PSOR since it is several times faster for a given desired accuracy. There are also cases in which the MI method continues to perform well, while it is impossible to achieve the desired accuracy with PSOR within a decent time interval.

Keywords: Moving index method; American options valuation problem; Projected successive over relaxation method (search for similar items in EconPapers)
Date: 2000
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378475400001762
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: https://EconPapers.repec.org/RePEc:eee:matcom:v:54:y:2000:i:4:p:373-381

Access Statistics for this article

Mathematics and Computers in Simulation (MATCOM) is currently edited by Robert Beauwens

More articles in Mathematics and Computers in Simulation (MATCOM) from Elsevier
Bibliographic data for series maintained by Catherine Liu ().