Clevenhaus, Anna; Ehrhardt, Matthias; Günther, Michael; … - In: Journal of risk and financial management : JRFM 13 (2020) 6/124, pp. 1-22
As the American early exercise results in a free boundary problem, in this article we add a penalty term to obtain a partial differential equation, and we also focus on an improved definition of the penalty term for American options. We replace the constant penalty parameter with a...
