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Multigrid for American option pricing with stochastic volatility

Multigrid for American option pricing with stochastic volatility

Clarke, Nigel and Parrott, Kevin (1999) Multigrid for American option pricing with stochastic volatility. Applied Mathematical Finance, 6 (3). pp. 177-195. ISSN 1350-486X (Print), 1466-4313 (Online) (doi:10.1080/135048699334528)

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Abstract

The paper describes an implicit finite difference approach to the pricing of American options on assets with a stochastic volatility. A multigrid procedure is described for the fast iterative solution of the discrete linear complementarity problems that result. The accuracy and performance of this approach is improved considerably by a strike-price related analytic transformation of asset prices and adaptive time-stepping.

Item Type: Article
Uncontrolled Keywords: American option pricing, stochastic volatility, finite difference method, multigrid, strike\-price related transformation, adaptive time\-stepping
Subjects: H Social Sciences > HB Economic Theory
Q Science > QA Mathematics > QA76 Computer software
Pre-2014 Departments: School of Computing & Mathematical Sciences
School of Computing & Mathematical Sciences > Centre for Numerical Modelling & Process Analysis
School of Computing & Mathematical Sciences > Centre for Numerical Modelling & Process Analysis > Computational Mechanics & Reliability Group
School of Computing & Mathematical Sciences > Centre for Numerical Modelling & Process Analysis > Computational Science & Engineering Group
School of Computing & Mathematical Sciences > Computer & Computational Science Research Group
School of Computing & Mathematical Sciences > Department of Computer Science
School of Computing & Mathematical Sciences > Department of Mathematical Sciences
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Last Modified: 14 Oct 2016 09:00
Selected for GREAT 2016: None
Selected for GREAT 2017: None
Selected for GREAT 2018: None
URI: http://gala.gre.ac.uk/id/eprint/312

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