An iterative algorithm for evaluating approximations to the optimal exercise boundary for a nonlinear Black-Scholes equation. (English) Zbl 1145.35321

The authors propose a new iterative numerical scheme for approximating of the early exercise boundary for a class of Black-Scholes equation for pricing American options with a volatility nonlinearity depending on the asset prices and second derivative of the option price. A number of experiments are performed for validation. The presented results are quite interesting.


35A35 Theoretical approximation in context of PDEs
35K55 Nonlinear parabolic equations
35K15 Initial value problems for second-order parabolic equations
91B28 Finance etc. (MSC2000)
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