ADI schemes for pricing American options under the Heston model
T Haentjens, KJ in't Hout - Applied Mathematical Finance, 2015 - Taylor & Francis
T Haentjens, KJ in't Hout
Applied Mathematical Finance, 2015•Taylor & FrancisIn this article, a simple, effective adaptation of Alternating Direction Implicit time
discretization schemes is proposed for the numerical pricing of American-style options under
the Heston model via a partial differential complementarity problem. The stability and
convergence of the new methods are extensively investigated in actual, challenging
applications. In addition, a relevant theoretical result is proved.
discretization schemes is proposed for the numerical pricing of American-style options under
the Heston model via a partial differential complementarity problem. The stability and
convergence of the new methods are extensively investigated in actual, challenging
applications. In addition, a relevant theoretical result is proved.
Abstract
In this article, a simple, effective adaptation of Alternating Direction Implicit time discretization schemes is proposed for the numerical pricing of American-style options under the Heston model via a partial differential complementarity problem. The stability and convergence of the new methods are extensively investigated in actual, challenging applications. In addition, a relevant theoretical result is proved.
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