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An Alternative Numerical Scheme to Approximate the Early Exercise Boundary of American Options

Author

Listed:
  • Denis Veliu

    (Departament of Finance-Banking, Metropolitan University of Tirana, 1000 Tirana, Albania
    These authors contributed equally to this work.)

  • Roberto De Marchis

    (MEMOTEF Department, Sapienza University of Rome, 00185 Rome, Italy
    These authors contributed equally to this work.)

  • Mario Marino

    (DEAMS “Bruno De Finetti”, University of Trieste, 34127 Trieste, Italy
    These authors contributed equally to this work.)

  • Antonio Luciano Martire

    (Department of Business Economics, Roma Tre University, 00185 Rome, Italy
    These authors contributed equally to this work.)

Abstract

This paper deals with a new numerical method for the approximation of the early exercise boundary in the American option pricing problem. In more detail, using the mean-value theorem for integrals, we provide a flexible algorithm that allows for reaching a more accurate numerical solution with fewer calculations rather than other previously described methods.

Suggested Citation

  • Denis Veliu & Roberto De Marchis & Mario Marino & Antonio Luciano Martire, 2022. "An Alternative Numerical Scheme to Approximate the Early Exercise Boundary of American Options," Mathematics, MDPI, vol. 11(1), pages 1-12, December.
    • Handle: RePEc:gam:jmathe:v:11:y:2022:i:1:p:187-:d:1019351
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    References listed on IDEAS

    as
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