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Section B

Comparison and survey of finite difference methods for pricing American options under finite activity jump-diffusion models

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Pages 1112-1134 | Received 12 Sep 2011, Accepted 20 Feb 2012, Published online: 22 Mar 2012
 

Abstract

Partial integro-differential formulations are often used for pricing American options under jump-diffusion models. A survey on such formulations and their numerical methods is presented. A detailed description of six efficient methods based on a linear complementarity formulation and finite difference discretizations is given. Numerical experiments compare the performance of these methods for pricing American put options under finite activity jump models.

2010 AMS Subject Classifications::

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