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Volume 21, Issue 3
A Numerical Method for Determining the Optimal Exercise Price to American Options

Xiong-Hua Wu & Xiu-Juan Feng

J. Comp. Math., 21 (2003), pp. 305-310.

Published online: 2003-06

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  • Abstract

American options can be exercised prior to the date of expiration, the valuation of American options then constitutes a free boundary value problem. How to determine the free boundary, i.e. the optimal exercise price, is a key problem. In this paper, a nonlinear equation is given. The free boundary can be obtained by solving the nonlinear equation and the numerical results are better.

  • Keywords

American options, Free boundary, Optimal exercise price, Nonlinear equation.

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COPYRIGHT: © Global Science Press

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@Article{JCM-21-305, author = {Wu , Xiong-Hua and Feng , Xiu-Juan}, title = {A Numerical Method for Determining the Optimal Exercise Price to American Options}, journal = {Journal of Computational Mathematics}, year = {2003}, volume = {21}, number = {3}, pages = {305--310}, abstract = {

American options can be exercised prior to the date of expiration, the valuation of American options then constitutes a free boundary value problem. How to determine the free boundary, i.e. the optimal exercise price, is a key problem. In this paper, a nonlinear equation is given. The free boundary can be obtained by solving the nonlinear equation and the numerical results are better.

}, issn = {1991-7139}, doi = {https://doi.org/}, url = {http://global-sci.org/intro/article_detail/jcm/10258.html} }
TY - JOUR T1 - A Numerical Method for Determining the Optimal Exercise Price to American Options AU - Wu , Xiong-Hua AU - Feng , Xiu-Juan JO - Journal of Computational Mathematics VL - 3 SP - 305 EP - 310 PY - 2003 DA - 2003/06 SN - 21 DO - http://doi.org/ UR - https://global-sci.org/intro/article_detail/jcm/10258.html KW - American options, Free boundary, Optimal exercise price, Nonlinear equation. AB -

American options can be exercised prior to the date of expiration, the valuation of American options then constitutes a free boundary value problem. How to determine the free boundary, i.e. the optimal exercise price, is a key problem. In this paper, a nonlinear equation is given. The free boundary can be obtained by solving the nonlinear equation and the numerical results are better.

Wu , Xiong-Hua and Feng , Xiu-Juan. (2003). A Numerical Method for Determining the Optimal Exercise Price to American Options. Journal of Computational Mathematics. 21 (3). 305-310. doi:
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