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arXiv · 1201.3289

A Reduced Basis Method for the Simulation of American Options

Bernard Haasdonk·Julien Salomon·Barbara Wohlmuth
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Abstract

We present a reduced basis method for the simulation of American option pricing. To tackle this model numerically, we formulate the problem in terms of a time dependent variational inequality. Characteristic ingredients are a POD-greedy and an angle-greedy procedure for the construction of the primal and dual reduced spaces. Numerical examples are provided, illustrating the approximation quality and convergence of our approach.

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Bernard Haasdonk, Julien Salomon, Barbara Wohlmuth. 2012-01-16. A Reduced Basis Method for the Simulation of American Options. https://arxiv.org/abs/1201.3289

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