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dc.contributor.authorHuang, Jacquelineen_US
dc.contributor.authorPang, Jong-Shien_US
dc.date.accessioned2007-04-02T21:18:34Z
dc.date.available2007-04-02T21:18:34Z
dc.date.issued2003-01-23en_US
dc.identifier.citationhttp://techreports.library.cornell.edu:8081/Dienst/UI/1.0/Display/cul.tc/2003-279en_US
dc.identifier.urihttps://hdl.handle.net/1813/5453
dc.description.abstractMany American option pricing models can be formulated as linear complementarity problems (LCPs) involving partial differential operators. While recent work with this approach has mainly addressed the model classes where the resulting LCPs are highly structured and can be solved fairly easily, this paper discusses a variety of option pricing models that are formulated as partial differential complementarity problems (PDCPs) of the convection-diffusion kind whose numerical solution depends on a better understanding of LCP methods. Specifically, we present second-order upwind finite difference schemes for the PDCPs and derive fundamental properties of the resulting discretized LCPs that are essential for the convergence and stability of the finite difference schemes and for the numerical solution of the LCPs by effective computational methods. Numerical results are reported to support the benefits of the proposed schemes. A main objective of this presentation is to elucidate the important role that the LCP has to play in the fast and effective numerical pricing of American options.en_US
dc.format.extent315101 bytes
dc.format.mimetypeapplication/pdf
dc.language.isoen_USen_US
dc.publisherCornell Universityen_US
dc.subjecttheory centeren_US
dc.titleOption Pricing and Linear Complementarityen_US
dc.typetechnical reporten_US


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