Details of talk
|Title||A new integral equation formulation for pricing American put options|
|Presenter||Song-Ping Zhu (University of Wollongong)|
|Author(s)||Prof Song-Ping Zhu|
|Session||Applied Mathematics/Industrial Mathematics|
A new integral equation to solve the American put option pricing problem is presented in this talk. The newly derived integral equation for pricing American options has some clear advantages over those proposed in the past with the following two unique features: a) it is in a form of one-dimensional integral, which means that it has a great advantage in terms of substantially increasing the speed with which values of an American option can be numerically computed. b) singularities associated with the optimal exercise boundary at the time to expiry are elegantly avoided; the computational accuracy and efficiency can thus be enhanced. Numerical accuracy and efficiency of the newly derived integral equation formulation for pricing American options are demonstrated through some preliminary results of numerical experiments.