Volume 8, Issue 1
A Robust Spectral Method for Pricing of American Put Options on Zero-Coupon Bonds

Edson Pindza and Kailash C. Patidar

10.4208/eajam.170516.201017a

East Asian J. Appl. Math., 8 (2018), pp. 126-138.

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  • Abstract

American put options on a zero-coupon bond problem is reformulated as a linear complementarity problem of the option value and approximated by a nonlinear partial differential equation. The equation is solved by an exponential time differencing method combined with a barycentric Legendre interpolation and the Krylov projection algorithm. Numerical examples shows the stability and good accuracy of the method.

  • History

Published online: 2018-02

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