Circulant preconditioners for pricing options

We use the normalized preconditioned conjugate gradient method with Strang’s circulant preconditioner to solve a nonsymmetric Toeplitz system Anx=b, which arises from the discretization of a partial integro-differential equation in option pricing. By using the definition of family of generating functions introduced in [16], we prove that Strang’s circulant preconditioner leads to a superlinear convergence rate under certain conditions. Numerical results exemplify our theoretical analysis.