On a numerical approximation scheme for construction of the early exercise boundary for a class of nonlinear Black-Scholes equations

Daniel Sevcovic

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arXiv · 1009.5973

On a numerical approximation scheme for construction of the early exercise boundary for a class of nonlinear Black-Scholes equations

Daniel Sevcovic

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Abstract

The purpose of this paper is to construct the early exercise boundary for a class of nonlinear Black--Scholes equations with a nonlinear volatility depending on the option price. We review a method how to transform the problem into a solution of a time depending nonlinear parabolic equation defined on a fixed domain. Results of numerical computation of the early exercise boundary for various nonlinear Black--Scholes equations are also presented.

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Daniel Sevcovic. 2010-09-29. On a numerical approximation scheme for construction of the early exercise boundary for a class of nonlinear Black-Scholes equations. https://arxiv.org/abs/1009.5973

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