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A New Efficient Numerical Method for Solving American Option under Regime Switching Model

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A New Efficient Numerical Method for Solving American Option under Regime Switching Model

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dc.contributor.author Egorova, Vera es_ES
dc.contributor.author Company Rossi, Rafael es_ES
dc.contributor.author Jódar Sánchez, Lucas Antonio es_ES
dc.date.accessioned 2017-05-18T17:23:04Z
dc.date.available 2017-05-18T17:23:04Z
dc.date.issued 2016-01
dc.identifier.issn 0898-1221
dc.identifier.uri http://hdl.handle.net/10251/81434
dc.description.abstract [EN] A system of coupled free boundary problems describing American put option pricing under regime switching is considered. In order to build numerical solution firstly a front-fixing transformation is applied. Transformed problem is posed on multidimensional fixed domain and is solved by explicit finite difference method. The numerical scheme is conditionally stable and is consistent with the first order in time and second order in space. The proposed approach allows the computation not only of the option price but also of the optimal stopping boundary. Numerical examples demonstrate efficiency and accuracy of the proposed method. The results are compared with other known approaches to show its competitiveness. es_ES
dc.description.sponsorship This work has been partially supported by the European Union in the FP7- PEOPLE-2012-ITN program under Grant Agreement Number 304617 (FP7 Marie Curie Action, Project Multi-ITN STRIKE-Novel Methods in Computational Finance) and the Ministerio de Economia y Competitividad Spanish grant MTM2013-41765-P. en_EN
dc.language Inglés es_ES
dc.publisher Elsevier es_ES
dc.relation MINECO/MTM2013-41765-P. es_ES
dc.relation.ispartof Computers and Mathematics with Applications es_ES
dc.rights Reserva de todos los derechos es_ES
dc.subject Regime switching es_ES
dc.subject Front-fixing transformation es_ES
dc.subject Free boundary es_ES
dc.subject Finite difference methods es_ES
dc.subject Numerical analysis es_ES
dc.subject.classification MATEMATICA APLICADA es_ES
dc.title A New Efficient Numerical Method for Solving American Option under Regime Switching Model es_ES
dc.type Artículo es_ES
dc.identifier.doi 10.1016/j.camwa.2015.11.019
dc.relation.projectID info:eu-repo/grantAgreement/EC/FP7/304617/PEOPLE-2012-ITN es_ES
dc.rights.accessRights Abierto es_ES
dc.contributor.affiliation Universitat Politècnica de València. Escuela Técnica Superior de Ingenieros de Caminos, Canales y Puertos - Escola Tècnica Superior d'Enginyers de Camins, Canals i Ports es_ES
dc.contributor.affiliation Universitat Politècnica de València. Instituto Universitario de Matemática Multidisciplinar - Institut Universitari de Matemàtica Multidisciplinària es_ES
dc.contributor.affiliation Universitat Politècnica de València. Facultad de Administración y Dirección de Empresas - Facultat d'Administració i Direcció d'Empreses es_ES
dc.description.bibliographicCitation Egorova, V.; Company Rossi, R.; Jódar Sánchez, LA. (2016). A New Efficient Numerical Method for Solving American Option under Regime Switching Model. Computers and Mathematics with Applications. 71:224-237. doi:10.1016/j.camwa.2015.11.019 es_ES
dc.description.accrualMethod Senia es_ES
dc.relation.publisherversion https://doi.org/10.1016/j.camwa.2015.11.019 es_ES
dc.description.upvformatpinicio 224 es_ES
dc.description.upvformatpfin 237 es_ES
dc.type.version info:eu-repo/semantics/publishedVersion es_ES
dc.description.volume 71 es_ES
dc.relation.senia 299079 es_ES
dc.contributor.funder European Commission
dc.contributor.funder Ministerio de Economía y Competitividad


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