Year: 2012
Author: A. D. Holmes, H. Yang
International Journal of Numerical Analysis and Modeling, Vol. 9 (2012), Iss. 4 : pp. 777–792
Abstract
A front-fixing finite element method is developed for the valuation of American put options on zero-coupon bonds under a class of one-factor models of short interest rates. Numerical results are presented to examine our method and to compare it with the usual finite element method. A conjecture concerning the behavior of the early exercise boundary near the option expiration date is proposed according to the numerical results.
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Journal Article Details
Publisher Name: Global Science Press
Language: English
DOI: https://doi.org/2012-IJNAM-658
International Journal of Numerical Analysis and Modeling, Vol. 9 (2012), Iss. 4 : pp. 777–792
Published online: 2012-01
AMS Subject Headings: Global Science Press
Copyright: COPYRIGHT: © Global Science Press
Pages: 16
Keywords: American put option zero-coupon bond free boundary problem front-fixing method finite element method.