TY - JOUR T1 - A Robust Spectral Method for Pricing of American Put Options on Zero-Coupon Bonds JO - East Asian Journal on Applied Mathematics VL - 1 SP - 126 EP - 138 PY - 2018 DA - 2018/02 SN - 8 DO - http://doi.org/10.4208/eajam.170516.201017a UR - https://global-sci.org/intro/article_detail/eajam/10888.html KW - Interest rate model, American put bond options, zero-coupon bond, barycentric Legendre method, Greeks. AB -

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.