Valuation of American options by the gradient projection method

Changhyun Kwon, Terry L. Friesz

Research output: Contribution to journalArticle

1 Scopus citations

Abstract

We study an equivalent optimization problem with an inequality constraint and boundary conditions, whose necessary condition for optimality is the variational inequality presentation of American options. To solve the problem, we use the gradient projection method, with discretizations both in time and space. We tested the algorithm and compared with the projective successive over-relaxation method.

Original languageEnglish (US)
Pages (from-to)380-388
Number of pages9
JournalApplied Mathematics and Computation
Volume206
Issue number1
DOIs
StatePublished - Dec 1 2008

All Science Journal Classification (ASJC) codes

  • Computational Mathematics
  • Applied Mathematics

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