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

Sevcovic, Daniel

Can. Appl. Math. Q. 15, No. 1, 77-97 (2007).

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.

Reviewer: Prabhat Kumar Mahanti (Saint John)

MSC:

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

Keywords:

fixed domain; risk adjustment; pricing American options