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Zbl 0714.90004
Jaillet, Patrick; Lamberton, Damien; Lapeyre, Bernard
Variational inequalities and the pricing of American options. (English)
[J] Acta Appl. Math. 21, No.3, 263-289 (1990). ISSN 0167-8019; ISSN 1572-9036/e

Summary: This paper is devoted to the derivation of some regularity properties of pricing functions for American options and to the discussions of numerical methods, based on the Bensoussan-Lions methods of variational inequalities. In particular, we provide a complete justification of the so-called Brennan-Schwartz algorithm for the valuation of American put options.

MSC 2000:: *91B28 Finance etc.
60G40 Optimal stopping
49J40 Variational methods including variational inequalities
60J60 Diffusion processes
65K10 Optimization techniques (numerical methods)
65M12 Stability and convergence of numerical methods (IVP of PDE)
91B24 Price theory and market structure
60H10 Stochastic ordinary differential equations
91B62 Dynamic economic models etc.

Keywords: option pricing; American options; Bensoussan-Lions methods; variational inequalities; Brennan-Schwartz algorithm

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