Journal of Computational Finance
ISSN:
1460-1559 (print)
1755-2850 (online)
Editor-in-chief: Christoph Reisinger
Path-dependent American options
Etienne Chevalier, Vathana Ly Vath and Mohamed Mnif
Need to know
- In this paper, we investigate a path-dependent American option problem and provide an efficient and implementable numerical scheme for the solution of its associated path-dependent variational inequality.
- We obtain the viscosity characterization of our value function and suggest a monotone, stable and consistent numerical scheme, the convergence of which is proven thanks to the uniqueness property.
- We further enrich our study by providing and implementing a numerical algorithm. Some numerical results are also included.
Abstract
In this paper, we investigate a path-dependent American option problem and provide an efficient and implementable numerical scheme for the solution of its associated path-dependent variational inequality.We obtain the viscosity characterization of our value function and suggest a monotone, stable and consistent numerical scheme, the convergence of which is proven thanks to the uniqueness property.We further enrich our study by providing and implementing a numerical algorithm. Some numerical results are also included.
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