Title

Valuation of American Options by the Gradient Projection Method

Document Type

Article

Publication Date

12-1-2008

Keywords

American options, variational inequalities, gradient projection

Digital Object Identifier (DOI)

https://doi.org/10.1016/j.amc.2008.09.024

Abstract

We study an equivalent optimization problem with an inequality constraint and boundary conditions, whose necessary condition for optimality is the variational inequality presentation of American options. To solve the problem, we use the gradient projection method, with discretizations both in time and space. We tested the algorithm and compared with the projective successive over-relaxation method.

Was this content written or created while at USF?

Yes

Citation / Publisher Attribution

Applied Mathematics and Computation, v. 206, issue 1, p. 380-388