An Iteration Procedure for Solving Integral Equations Related to Optimal Stopping Problems
A new algorithm for finding value functions of finite horizon optimal stopping problems in one-dimensional diffusion models is presented. It is based on a time discretization of the corresponding integral equation. The proposed iterative procedure for solving the discretized integral equation converges in a finite number of steps and delivers in each step a lower or an upper bound for value of discretized problem on the whole time interval. The remarks on the application of the method for solving integral equations related to some optimal stopping problems are given.
|Date of creation:||May 2006|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://sfb649.wiwi.hu-berlin.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kim, In Joon, 1990. "The Analytic Valuation of American Options," Review of Financial Studies, Society for Financial Studies, vol. 3(4), pages 547-72.
- S. D. Jacka, 1991. "Optimal Stopping and the American Put," Mathematical Finance, Wiley Blackwell, vol. 1(2), pages 1-14.
- Gapeev, P.V. & Peskir, G., 2006. "The Wiener disorder problem with finite horizon," Stochastic Processes and their Applications, Elsevier, vol. 116(12), pages 1770-1791, December.
- L. C. G. Rogers, 2002. "Monte Carlo valuation of American options," Mathematical Finance, Wiley Blackwell, vol. 12(3), pages 271-286.
- Carr, Peter, 1998. "Randomization and the American Put," Review of Financial Studies, Society for Financial Studies, vol. 11(3), pages 597-626.
- Peter Carr & Robert Jarrow & Ravi Myneni, 1992. "Alternative Characterizations Of American Put Options," Mathematical Finance, Wiley Blackwell, vol. 2(2), pages 87-106.
- Alexander Novikov & Albert Shiryaev, 2004. "On an Effective Solution of the Optimal Stopping Problem for Random Walks," Research Paper Series 131, Quantitative Finance Research Centre, University of Technology, Sydney.
- Denis Belomestny & Grigori Milstein, 2006. "Adaptive Simulation Algorithms for Pricing American and Bermudian Options by Local Analysis of Financial Market," SFB 649 Discussion Papers SFB649DP2006-038, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
When requesting a correction, please mention this item's handle: RePEc:hum:wpaper:sfb649dp2006-043. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (RDC-Team)
If references are entirely missing, you can add them using this form.