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Convergence of the Approximation Scheme to American Option Pricing via the Discrete Morse Semiflow

Convergence of the Approximation Scheme to American Option Pricing via the Discrete Morse Semiflow We consider the approximation scheme to the American call option via the discrete Morse semiflow, which is a minimizing scheme of a time semi-discretized variational functional. In this paper we obtain a rate of convergence of approximate solutions and the convergence of approximate free boundaries. We mainly apply the theory of variational inequalities and that of viscosity solutions to prove our results. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Applied Mathematics and Optimization Springer Journals

Convergence of the Approximation Scheme to American Option Pricing via the Discrete Morse Semiflow

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References (40)

Publisher
Springer Journals
Copyright
Copyright © 2011 by Springer Science+Business Media, LLC
Subject
Mathematics; Calculus of Variations and Optimal Control; Optimization; Theoretical, Mathematical and Computational Physics; Numerical and Computational Physics; Mathematical Methods in Physics; Systems Theory, Control
ISSN
0095-4616
eISSN
1432-0606
DOI
10.1007/s00245-011-9145-x
Publisher site
See Article on Publisher Site

Abstract

We consider the approximation scheme to the American call option via the discrete Morse semiflow, which is a minimizing scheme of a time semi-discretized variational functional. In this paper we obtain a rate of convergence of approximate solutions and the convergence of approximate free boundaries. We mainly apply the theory of variational inequalities and that of viscosity solutions to prove our results.

Journal

Applied Mathematics and OptimizationSpringer Journals

Published: Dec 1, 2011

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