Numerical study of splitting methods for American option valuation
Computational Finance
2016-11-01 v1
Abstract
This paper deals with the numerical approximation of American-style option values governed by partial differential complementarity problems. For a variety of one- and two-asset American options we investigate by ample numerical experiments the temporal convergence behaviour of three modern splitting methods: the explicit payoff approach, the Ikonen-Toivanen approach and the Peaceman-Rachford method. In addition, the temporal accuracy of these splitting methods is compared to that of the penalty approach.
Keywords
Cite
@article{arxiv.1610.09622,
title = {Numerical study of splitting methods for American option valuation},
author = {Karel in 't Hout and Radoslav Valkov},
journal= {arXiv preprint arXiv:1610.09622},
year = {2016}
}