Article2002

Parabolic ADI Methods for Pricing American Options on Two Stocks

50 citations0/0 files storedMathematics of Operations Research

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Stochastic processes and financial applications Advanced Numerical Methods in Computational Mathematics Matrix Theory and Algorithms

Abstract

We propose two numerical methods for pricing American options on two stocks based on the ADI algorithm of Peaceman and Rachford (1955). We prove the stability and convergence of these schemes and establish a comparative result.

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References

2005Controlled Markov Processes and Viscosity Solutions 1994Controlled markov processes and viscosity solutions 1977THE VALUATION OF AMERICAN PUT OPTIONS 1977The Valuation of American Put Options 1990Variational inequalities and the pricing of American options 1977Probability Methods for Approximations in Stochastic Control and for Elliptic Equations 1989Numerical Evaluation of Multivariate Contingent Claims 1985Valuation by Approximation: A Comparison of Alternative Option Valuation Techniques

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