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[02334] A generalized integral equation formulation for pricing American options under regime-switching model

  • Session Time & Room : 4E (Aug.24, 17:40-19:20) @D505
  • Type : Contributed Talk
  • Abstract : In this paper, we present a generalized integral equation formulation for American put options under regime-switching model, with a goal of improving computational efficiency in mind, particularly when the number of regimes, $n$ is large. Given that the integral equation approach is characterized with its excellent trade off between maximizing analytical tractability and minimizing numerical discretization, our achieved high efficiency is based on a newly proved theorem, which facilitates the decoupling of an originally simultaneously involved $n$-PDEs so that they can be solved recursively at the numerical solution stage. While some numerical examples are provided to demonstrate the implementation of the new approach and its efficiency, it is anticipated that the very same theorem can be used to reduce the computational burden if other numerical approaches are adopted.
  • Classification : 91G20, 91-10
  • Format : Talk at Waseda University
  • Author(s) :
    • Yawen Zheng (University of Wollongong)
    • Song-Ping Zhu (University of Wollongong)