Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
4640958 | Journal of Computational and Applied Mathematics | 2009 | 17 Pages |
Abstract
An optimal convergence rate O(Δx)O(Δx) for an explicit finite difference scheme for a variational inequality problem is obtained under the stability condition σ2ΔtΔx2⩽1 using completely PDE methods. As a corollary, a binomial tree scheme of an American put option (where σ2ΔtΔx2=1) is convergent unconditionally with the rate O((Δt)1/2)O((Δt)1/2).
Related Topics
Physical Sciences and Engineering
Mathematics
Applied Mathematics
Authors
Bei Hu, Jin Liang, Lishang Jiang,