2011/09/19 by David Šiška, Šiška, David
Economics, Econometrics and Finance · Mathematics · #35R35 #60G40 #65M06 #65M12 #91G60 #91G80 #Computational Finance (q-fin.CP) #FOS: Economics and business #FOS: Electrical engineering #FOS: Mathematics #Mathematical Biology Tumor Growth #Numerical Analysis (math.NA) #Optimization and Control (math.OC) #Pricing of Securities (q-fin.PR) #Probability (math.PR) #Stochastic processes and financial applications #Systems and Control (eess.SY) #electronic engineering #information engineering
paper · pdf · doi:10.48550/arxiv.1109.4032
openalex publication_date 2011/09/19 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
Finite difference approximations to multi-asset American put option price are considered. The assets are modelled as a multi-dimensional diffusion process with variable drift and volatility. Approximation error of order one quarter with respect to the time discretisation parameter and one half with respect to the space discretisation parameter is proved by reformulating the corresponding optimal stopping problem as a solution of a degenerate Hamilton-Jacobi-Bellman equation. Furthermore, the error arising from restricting the discrete problem to a finite grid by reducing the original problem to a bounded domain is estimated.