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arxiv: 1309.0110 · v1 · pith:EDGMFWERnew · submitted 2013-08-31 · 💱 q-fin.CP · cs.NA· math.NA

ADI schemes for pricing American options under the Heston model

classification 💱 q-fin.CP cs.NAmath.NA
keywords hestonmodeloptionspricingschemesunderactualadaptation
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In this paper a simple, effective adaptation of Alternating Direction Implicit (ADI) time discretization schemes is proposed for the numerical pricing of American-style options under the Heston model via a partial differential complementarity problem. The stability and convergence of the new methods are extensively investigated in actual, challenging applications. In addition a relevant theoretical result is proved.

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