An efficient finite element method for pricing American multi-asset put options

作者：Zhang, Ran^*; Zhang, Qi; Song, Haiming

来源：Communications in Nonlinear Science & Numerical Simulation, 2015, 29(1-3): 25-36.

DOI：10.1016/j.cnsns.2015.03.022

• American multi-asset put options
• Linear complementary problem
• Perfectly matched layer
• Semi-implicit finite element method

This paper is devoted to the valuation of American multi asset put options. It is well known that the American multi asset put option satisfies a linear complementary problem (LCP) on an unbounded domain. We consider a penalty method in which the LCP could be reformulated into a nonlinear parabolic problem on an unbounded domain. For the unbounded computational domain, a perfectly matched layer (PML) technique is applied to truncate it. As to the resulting bounded domain problem related to the option, we use a semi-implicit finite element method (SIFEM) to solve it. The convergence of this method is analyzed in detail. Finally, we present some numerical simulations to show the validity and efficiency of the theoretical analysis.

• 出版日期2015-12
• 单位吉林大学