ADI schemes for pricing American options under the Heston model

Tinne Haentjens; Karel in 't Hout

doi:10.1080/1350486x.2015.1009129

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arXiv · 1309.0110

ADI schemes for pricing American options under the Heston model

Tinne Haentjens·Karel in 't Hout

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Abstract

In this paper a simple, effective adaptation of Alternating Direction Implicit (ADI) time discretization schemes is proposed for the numerical pricing of American-style options under the Heston model via a partial differential complementarity problem. The stability and convergence of the new methods are extensively investigated in actual, challenging applications. In addition a relevant theoretical result is proved.

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BibTeX RIS

Tinne Haentjens, Karel in 't Hout. 2013-08-31. ADI schemes for pricing American options under the Heston model. https://doi.org/10.1080/1350486x.2015.1009129

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