On a numerical approximation scheme for construction of the early exercise boundary for a class of nonlinear Black-Scholes equations

Details On a numerical approximation scheme for construction of the early exercise boundary for a class of nonlinear Black-Scholes equations On a numerical approximation scheme for construction of the early exercise boundary for a class of nonlinear Black-Scholes equations

2010-09-29

arxiv.org/abs/1009.5973v2

In: A. Bartel, M. Brunk, M. Gunther, S. Schops and M. Striebel (eds.) Proccedings of the 16th European Conference on Mathemati

Economy

Quantitative Finance

Computational Finance

Scientific paper

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

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