A Finite Volume–Alternating Direction Implicit Method for the Valuation of American Options under the Heston Model
International Journal of Computer Mathematics
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A finite volume–alternating direction implicit method is proposed for numerical valuation of the American options under the Heston model. It is based on decoupling correlated stock price process and volatility process so that corresponding partial differential operator does not contain the mixed partial derivative term. Hence, the proposed method is numerically simple and fast. Numerical results are presented to examine the accuracy of the proposed method and to compare it with the others.
Options Valuation; Finite Volume Method; Alternating Direction Implicit Method; Heston Model
Mathematics | Physical Sciences and Mathematics
A Finite Volume–Alternating Direction Implicit Method for the Valuation of American Options under the Heston Model.
International Journal of Computer Mathematics, 97(3),