Multigrid for American option pricing with stochastic volatility

The paper describes an implicit finite difference approach to the pricing of American options on assets with a stochastic volatility. A multigrid procedure is described for the fast iterative solution of the discrete linear complementarity problems that result. The accuracy and performance of this approach is improved considerably by a strike-price related analytic transformation of asset prices and adaptive time-stepping.

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Year of publication:	1999
Authors:	Clarke, Nigel ; Parrott, Kevin
Published in:	Applied Mathematical Finance. - Taylor & Francis Journals, ISSN 1350-486X. - Vol. 6.1999, 3, p. 177-195
Publisher:	Taylor & Francis Journals
Subject:	American Option Pricing \| Stochastic Volatility \| Finite Difference Method \| Multigrid \| Strike-price Related Transformation \| Adaptive Time-stepping

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Type of publication:	Article
Source:	RePEc - Research Papers in Economics

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