Parameter estimation approach to the free boundary for the pricing of an American call option

被引:0
作者
Cho, Chung-Ki [1 ]
Kang, Sunbu
Kim, Taekkeun
Kwon, Yonghoon
机构
[1] Soonchunhyang Univ, Dept Math, Asan 336745, South Korea
[2] Pohang Univ Sci & Technol, Dept Math, Pohang 790784, South Korea
关键词
American option; Black-Scholes equation; free boundary problem; optimal exercise curve; finite-element method; numerical result;
D O I
暂无
中图分类号
O29 [应用数学];
学科分类号
070104 ;
摘要
In this paper, we consider a free boundary problem which arises in the pricing of an American call option. The free boundary represents the optimal exercise price as a function of time before a maturity date. We are developing a parameter estimation technique to obtain both the optimal exercise curve of an American call option and its price. For the numerical solution of a forward problem, a time marching finite element method is adopted. Numerical experiment shows the convergence property of the approximation scheme. (C) 2006 Elsevier Ltd. All rights reserved.
引用
收藏
页码:713 / 720
页数:8
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