A robust upwind difference scheme for pricing perpetual American put options under stochastic volatility

作者：Le Anbo; Cen Zhongdi; Xu Aimin

来源：International Journal of Computer Mathematics, 2012, 89(9): 1135-1144.

DOI：10.1080/00207160.2012.658379

• American option
• linear complementarity problem
• stochastic volatility model
• upwind difference scheme
• mixed derivatives

In this paper, we present an upwind difference scheme for the valuation of perpetual American put options, using Heston's stochastic volatility model. The matrix associated with the discrete operator is an M-matrix, which ensure that the scheme is stable. We apply the maximum principle to the discrete linear complementarity problem in two mesh sets and derive the error estimates. Numerical results support the theoretical results.

• 出版日期2012
• 单位浙江万里学院