Valuing option on the maximum of two assets using improving modified Gauss-Seidel method
This paper presents the numerical solution for the option on the maximum of two assets using Improving Modified Gauss-Seidel (IMGS) iterative method. Actually, this option can be governed by two-dimensional Black-Scholes partial differential equation (PDE). The Crank-Nicolson scheme is applied to di...
| Main Authors: | , , , |
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| Other Authors: | |
| Format: | Conference Paper |
| Published: |
American Institute of Physics
2014
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| Subjects: | |
| Online Access: | http://hdl.handle.net/20.500.11937/19147 |
| Summary: | This paper presents the numerical solution for the option on the maximum of two assets using Improving Modified Gauss-Seidel (IMGS) iterative method. Actually, this option can be governed by two-dimensional Black-Scholes partial differential equation (PDE). The Crank-Nicolson scheme is applied to discretize the Black-Scholes PDE in order to derive a linear system. Then, the IMGS iterative method is formulated to solve the linear system. Numerical experiments involving Gauss-Seidel (GS) and Modified Gauss-Seidel (MGS) iterative methods are implemented as control methods to test the computational efficiency of the IMGS iterative method. |
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