The Mathematical Institute, University of Oxford, Eprints Archive

Numerical Methods For American Option Pricing

Liu, Peng (2008) Numerical Methods For American Option Pricing. Masters thesis, University of Oxford.

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Abstract

An analytic solution does not exist for evaluating the American put option. Usually, the value is obtained by applying numerical methods. For instance, the PSOR algorithm is a widely used one in financial industry. In the past few years, many other methods to solve American option problems have been introduced, two examples are Linear Programming and Penalty method. The aims of this dissertation are:
first, to provide an introduction to four algorithms - Explicit, PSOR,
Penalty and Linear Programming on pricing American put options;
and second, to make comparisons through numerical tests.

Item Type:Thesis (Masters)
Subjects:H - N > Mathematics education
Research Groups:Mathematical and Computational Finance Group
ID Code:706
Deposited By:Laura Auger
Deposited On:02 Jul 2008
Last Modified:20 Jul 2009 14:23

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