### Abstract

Original language | English |
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Place of Publication | Tilburg |

Publisher | Finance |

Number of pages | 22 |

Volume | 2004-20 |

Publication status | Published - 2004 |

### Publication series

Name | CentER Discussion Paper |
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Volume | 2004-20 |

### Fingerprint

### Keywords

- option pricing
- inequality
- markov chains

### Cite this

*Using Localised Quadratic Functions on an Irregular Grid for Pricing High-Dimensional American Options*. (CentER Discussion Paper; Vol. 2004-20). Tilburg: Finance.

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**Using Localised Quadratic Functions on an Irregular Grid for Pricing High-Dimensional American Options.** / Berridge, S.J.; Schumacher, J.M.

Research output: Working paper › Discussion paper › Other research output

TY - UNPB

T1 - Using Localised Quadratic Functions on an Irregular Grid for Pricing High-Dimensional American Options

AU - Berridge, S.J.

AU - Schumacher, J.M.

N1 - Pagination: 22

PY - 2004

Y1 - 2004

N2 - We propose a method for pricing high-dimensional American options on an irregular grid; the method involves using quadratic functions to approximate the local effect of the Black-Scholes operator.Once such an approximation is known, one can solve the pricing problem by time stepping in an explicit or implicit manner.We study stability of the method in two dimensions, and find that the grid structure is important in providing a stable approximation to the operator.

AB - We propose a method for pricing high-dimensional American options on an irregular grid; the method involves using quadratic functions to approximate the local effect of the Black-Scholes operator.Once such an approximation is known, one can solve the pricing problem by time stepping in an explicit or implicit manner.We study stability of the method in two dimensions, and find that the grid structure is important in providing a stable approximation to the operator.

KW - option pricing

KW - inequality

KW - markov chains

M3 - Discussion paper

VL - 2004-20

T3 - CentER Discussion Paper

BT - Using Localised Quadratic Functions on an Irregular Grid for Pricing High-Dimensional American Options

PB - Finance

CY - Tilburg

ER -