Back to Search
Start Over
A second-order Nystrom-type discretization for the early-exercise curve of American put options.
- Source :
-
International Journal of Computer Mathematics . Jun2009, Vol. 86 Issue 6, p982-991. 10p. 2 Charts, 3 Graphs. - Publication Year :
- 2009
-
Abstract
- It is well known that the value of an American option can be expressed as the sum of the corresponding European option and a premium, which reflects the additional right of early exercise. Based on this expression, it is possible to derive an integral equation for the early-exercise curve. Because the early-exercise curve is not sufficiently smooth at expiry, an ad hoc Nystrom discretization of high order for solving the integral equation is not guaranteed. In this paper, we present a Nystrom-type discretization, which uses an adequate integral transformation to circumvent the non-sufficient smoothness at expiry and results in a method of second order. [ABSTRACT FROM AUTHOR]
- Subjects :
- *CURVES
*INTEGRAL equations
*GEOMETRY
*FUNCTIONAL equations
*OPERATIONAL calculus
Subjects
Details
- Language :
- English
- ISSN :
- 00207160
- Volume :
- 86
- Issue :
- 6
- Database :
- Academic Search Index
- Journal :
- International Journal of Computer Mathematics
- Publication Type :
- Academic Journal
- Accession number :
- 40627654
- Full Text :
- https://doi.org/10.1080/00207160802578347