Variational inequalities and the pricing of American options |
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Authors: | Patrick Jaillet Damien Lamberton Bernard Lapeyre |
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Affiliation: | (1) LAMM. CERMA-ENPC La Courtine, 93167 Noisy le Grand, France |
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Abstract: | This paper is devoted to the derivation of some regularity properties of pricing functions for American options and to the discussion of numerical methods, based on the Bensoussan-Lions methods of variational inequalities. In particular, we provide a complete justification of the so-called Brennan-Schwartz algorithm for the valuation of American put options.Research supported in part by a contract from Banque INDOSUEZ. |
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Keywords: | 90A09 60G40 60J60 65K10 65M10 |
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