On a Numerical Approximation Scheme for Construction of the Early Exercise Boundary for a Class of Nonlinear Black–Scholes Equations

Conference paper
Part of the Mathematics in Industry book series (MATHINDUSTRY, volume 17)

Abstract

The purpose of this paper is to construct the early exercise boundary for a class of nonlinear Black–Scholes equations with a volatility function depending on the option price. We review and revisit a method how to transform the problem into a solution of a time depending nonlinear parabolic equation defined on a fixed domain. An example of numerical computation of the early exercise boundary for a nonlinear Black–Scholes equation is also presented.

Keywords

Free Boundary Option Price Free Boundary Problem Nonlinear Parabolic Equation Algebraic Constraint 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer-Verlag Berlin Heidelberg 2012

Authors and Affiliations

  1. 1.Department of Applied Mathematics and Statistics, Faculty of Mathematics, Physics & InformaticsComenius UniversityBratislavaSlovak Republic

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