Pricing American bond options using a cubic spline collocation method

Pricing American bond options using a cubic spline collocation method

In this paper, American options on a discount bond are priced under the Cox-Ingrosll-Ross (CIR) model. The linear complementarity problem of the option value is solved numerically by a penalty method. The problem is transformed into a nonlinear partial differential equation (PDE) by adding a power p...

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Bibliographic Details
Main Authors: Abdelmajid El hajaji, Khalid Hilal, Abdelhafid Serghini, El bekkey Mermri
Format: Article
Language:English
Published: Sociedade Brasileira de Matemática 2014-09-01
Series:Boletim da Sociedade Paranaense de Matemática
Subjects:
American put
Trapezoidal method
Spline collocation
Online Access:http://periodicos.uem.br/ojs/index.php/BSocParanMat/article/view/21354

Internet

http://periodicos.uem.br/ojs/index.php/BSocParanMat/article/view/21354

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