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Volume 9, Issue 4
A Front-Fixing Finite Element Method for the Valuation of American Put Options on Zero-Coupon Bonds

A. D. Holmes & H. Yang

Int. J. Numer. Anal. Mod., 9 (2012), pp. 777-792.

Published online: 2012-09

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  • 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.

  • Keywords

American put option, zero-coupon bond, free boundary problem, front-fixing method, finite element method.

  • AMS Subject Headings

65M12, 65M60, 91B28

  • Copyright

COPYRIGHT: © Global Science Press

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@Article{IJNAM-9-777, author = {Holmes , A. D. and Yang , H.}, title = {A Front-Fixing Finite Element Method for the Valuation of American Put Options on Zero-Coupon Bonds}, journal = {International Journal of Numerical Analysis and Modeling}, year = {2012}, volume = {9}, number = {4}, pages = {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.

}, issn = {2617-8710}, doi = {https://doi.org/}, url = {http://global-sci.org/intro/article_detail/ijnam/658.html} }
TY - JOUR T1 - A Front-Fixing Finite Element Method for the Valuation of American Put Options on Zero-Coupon Bonds AU - Holmes , A. D. AU - Yang , H. JO - International Journal of Numerical Analysis and Modeling VL - 4 SP - 777 EP - 792 PY - 2012 DA - 2012/09 SN - 9 DO - http://doi.org/ UR - https://global-sci.org/intro/article_detail/ijnam/658.html KW - American put option, zero-coupon bond, free boundary problem, front-fixing method, finite element method. AB -

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.

Holmes , A. D. and Yang , H.. (2012). A Front-Fixing Finite Element Method for the Valuation of American Put Options on Zero-Coupon Bonds. International Journal of Numerical Analysis and Modeling. 9 (4). 777-792. doi:
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