Title: A Numerical Approach for the American Call Option Pricing Model
Abstract: We present a numerical approach of the free boundary problem for the Black-Scholes equation for pricing the American call option on stocks paying a continuous dividend. A fixed domain transformation of the free boundary problem into a parabolic equation defined on a fixed spatial domain is performed. As a result a nonlinear time-dependent term is involved in the resulting equation. Two iterative numerical algorithms are proposed. Computational experiments, confirming the accuracy of the algorithms are discussed.
Publication Year: 2011
Publication Date: 2011-01-01
Language: en
Type: book-chapter
Indexed In: ['crossref']
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Cited By Count: 8
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