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In this work, we develop a novel efficient quadrature and sparse grid based polynomial interpolation method to price American options with multiple underlying assets. The approach is based on first formulating the pricing of American…
American put options are among the most frequently traded single stock options, and their calibration is computationally challenging since no closed-form expression is available. Due to the higher flexibility in comparison to European…
In this research work, we propose a high-order time adapted scheme for pricing a coupled system of fixed-free boundary constant elasticity of variance (CEV) model on both equidistant and locally refined space-grid. The performance of our…
We propose a time-adaptive, high-order compact finite difference scheme for option pricing in a family of stochastic volatility models. We employ a semi-discrete high-order compact finite difference method for the spatial discretisation,…
We propose a fourth--order compact finite--difference (HOC--FD) scheme for the transformed Bates partial integro--differential equation (PIDE). The method employs an implicit--explicit (IMEX) Crank--Nicolson framework for local terms and…
European options can be priced by solving parabolic partial(-integro) differential equations under stochastic volatility and jump-diffusion models like Heston, Merton, and Bates models. American option prices can be obtained by solving…
Pricing financial or real options with arbitrary payoffs in regime-switching models is an important problem in finance. Mathematically, it is to solve, under certain standard assumptions, a general form of optimal stopping problems in…
This paper introduces a semi-analytical method for pricing American options on assets (stocks, ETFs) that pay discrete and/or continuous dividends. The problem is notoriously complex because discrete dividends create abrupt price drops and…
In this article, a numerical scheme is introduced for solving the fractional partial differential equation (FPDE) arising from electromagnetic waves in dielectric media (EMWDM) by using an efficient class of finite difference methods. The…
For the numerical solution of the American option valuation problem, we provide a script written in MATLAB implementing an explicit finite difference scheme. Our main contribute is the definition of a posteriori error estimator for the…
This paper presents new fast algorithms for Hermite interpolation and evaluation over finite fields of characteristic two. The algorithms reduce the Hermite problems to instances of the standard multipoint interpolation and evaluation…
American options are studied in a general discrete market in the presence of proportional transaction costs, modelled as bid-ask spreads. Pricing algorithms and constructions of hedging strategies, stopping times and martingale…
This paper investigates analytic properties of American option prices under the finite moment log-stable (FMLS) model. Under this model the price of American options is characterised by the free boundary problem of a fractional partial…
We investigate methods for pricing American options under the variance gamma model. The variance gamma process is a pure jump process which is constructed by replacing the calendar time by the gamma time in a Brownian motion with drift,…
High order accurate Hermite methods for the wave equation on curvilinear domains are presented. Boundaries are treated using centered compatibility conditions rather than more standard one-sided approximations. Both first-order-in-time…
An efficient computational algorithm to price financial derivatives is presented. It is based on a path integral formulation of the pricing problem. It is shown how the path integral approach can be worked out in order to obtain fast and…
We introduce a new approach for the numerical pricing of American options. The main idea is to choose a finite number of suitable excessive functions (randomly) and to find the smallest majorant of the gain function in the span of these…
We study American swaptions in the linear-rational (LR) term structure model introduced in [5]. The American swaption pricing problem boils down to an optimal stopping problem that is analytically tractable. It reduces to a free-boundary…
This study investigates enhancing option pricing by extending the Black-Scholes model to include stochastic volatility and interest rate variability within the Partial Differential Equation (PDE). The PDE is solved using the finite…
In this paper we investigate a nonlinear generalization of the Black-Scholes equation for pricing American style call options in which the volatility term may depend on the underlying asset price and the Gamma of the option. We propose a…