Name
Title | ||
|---|---|---|
Convergence of a finite element approximation to a degenerate parabolic variational inequality with non-smooth data arising from American option valuation |
Abstract | ||
|---|---|---|
This paper deals with the approximation of solutions to a degenerate variational inequality of parabolic type with a non-smooth final condition arising from American option pricing by the piecewise linear finite element method in space and an implicit time-stepping scheme. We show that the error of the approximation in a weighted Sobolev norm is of order O(h2/3+Δ t1/3) under some realistic regularity assumptions on the exact solution, where h and Δ t denote the mesh parameters in space and time, respectively. Numerical examples are presented to confirm our theoretical results. |
Year | DOI | Venue |
|---|---|---|
2010 | 10.1080/10556780903049942 | Optimization Methods and Software |
Keywords | Field | DocType |
piecewise linear finite element,parabolic variational inequality,paper deal,parabolic type,finite element approximation,mesh parameter,non-smooth data,american option pricing,order o,exact solution,implicit time-stepping scheme,american option valuation,non-smooth final condition,numerical example,complementarity problem,finite element method,parabolic partial differential equation,variational inequality,piecewise linear,finite element analysis,black scholes equation | Degenerate energy levels,Mathematical optimization,Valuation of options,Mathematical analysis,Sobolev space,Finite element method,Complementarity theory,Piecewise linear function,Mathematics,Variational inequality,Parabola | Journal |
Volume | Issue | ISSN |
25 | 5 | 1055-6788 |
Citations | PageRank | References |
1 | 0.36 | 3 |
Authors | ||
2 | ||
Name | Order | Citations | PageRank |
|---|---|---|---|
| Guanghui Wang | 1 | 1 | 0.70 |
| Song Wang | 2 | 71 | 6.80 |