A Numerical Analysis of American Options with Regime Switching

Authors:
Hongtao Yang
Affiliations:
Department of Mathematical Sciences, University of Nevada, Las Vegas, USA 89154
Venue:
Journal of Scientific Computing
Year:
2010

Citing 2
Cited 2

Finite Element Error Estimates for a Nonlocal Problem in American Option Valuation

SIAM Journal on Numerical Analysis
A Front-Fixing Finite Element Method for the Valuation of American Options

SIAM Journal on Scientific Computing

Methods for Pricing American Options under Regime Switching

SIAM Journal on Scientific Computing
A Comparison of Iterated Optimal Stopping and Local Policy Iteration for American Options Under Regime Switching

Journal of Scientific Computing

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Abstract

A finite element method and a simple lattice method are proposed for numerical valuation of American options under a regime switching model. Their stability estimates are established. Numerical results are presented to compare our methods and to examine their accuracy for various combinations of parameters. The dependency of early exercise prices and option prices on parameters are also investigated numerically.