An irregular grid approach for pricing high-dimensional American options

被引：11

作者：

Berridge, S. J. ^{[1
]}

Schumacher, J. M. ^{[2
,3
]}

机构：

[1] Man Investments, Sugar Quay, London EC3R 6DU, England

[2] Tilburg Univ, Dept Econometr & Operat Res, NL-5000 LE Tilburg, Netherlands

[3] Tilburg Univ, Ctr Econ Res CentER, NL-5000 LE Tilburg, Netherlands

来源：

JOURNAL OF COMPUTATIONAL AND APPLIED MATHEMATICS | 2008年 / 222卷 / 01期

关键词：

American options; High-dimensional problems; Free boundary problems; Optimal stopping; Variational inequalities; Numerical methods; Unstructured mesh; Markov chain approximation;

D O I：

10.1016/j.cam.2007.10.045

中图分类号：

O29 [应用数学];

学科分类号：

070104 ;

摘要：

We propose and test a new method for pricing American options in a high-dimensional setting. The method is centered around the approximation of the associated complementarity problem on an irregular grid. We approximate the partial differential operator on this grid by appealing to the SIDE representation of the underlying process and computing the root of the transition probability matrix of an approximating Markov chain. Experimental results in five-dimensions are presented for four different payoff functions. (C) 2007 Elsevier B.V. All rights reserved.

引用

页码：94 / 111

页数：18

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