356
Views
23
CrossRef citations to date
0
Altmetric
SECTION B

Application of the local radial basis function-based finite difference method for pricing American options

, &
Pages 1608-1624 | Received 28 Jan 2013, Accepted 24 Jul 2014, Published online: 27 Aug 2014
 

Abstract

In this paper we discuss a local radial basis function-based finite difference (RBF-FD) scheme for numerical solution of multi-asset American option problems. The governing equation is discretized by the θ-method and the option price is approximated by the RBF-FD method. Numerical experiments are performed with the multiquadratic radial basis function for single and double asset problem and results obtained are compared with existing ones. We show numerically that the scheme is second-order accurate. Stability of the scheme is also discussed.

2010 AMS Subject Classifications:

Acknowledgements

The authors are grateful to the anonymous referees and the editorial board for their valuable comments and suggestions that have led to an improved version of the article. The work of authors (Alpesh Kumar, Lok Pati Tripathi) is supported by Council of Scientific and Industrial Research, India.

Reprints and Corporate Permissions

Please note: Selecting permissions does not provide access to the full text of the article, please see our help page How do I view content?

To request a reprint or corporate permissions for this article, please click on the relevant link below:

Academic Permissions

Please note: Selecting permissions does not provide access to the full text of the article, please see our help page How do I view content?

Obtain permissions instantly via Rightslink by clicking on the button below:

If you are unable to obtain permissions via Rightslink, please complete and submit this Permissions form. For more information, please visit our Permissions help page.