ADI schemes for pricing American options under the Heston model

Abstract

In this paper a simple, effective adaptation of Alternating Direction Implicit (ADI) time discretization schemes is proposed for the numerical pricing of American-style options under the Heston model via a partial differential complementarity problem. The stability and convergence of the new methods are extensively investigated in actual, challenging applications. In addition a relevant theoretical result is proved.

References in corpus (1)

• Stability of central finite difference schemes for the Heston PDE

Cited by in corpus (2)

• Pricing European and American Options under Heston Model using Discontinuous Galerkin Finite Elements
• Performance of tail hedged portfolio with third moment variation swap