Re: chosing assetSteps and timeSteps for FdAmericanOption

Posted by Kris . on May 06, 2002; 8:44pm
URL: http://quantlib.414.s1.nabble.com/chosing-assetSteps-and-timeSteps-for-FdAmericanOption-tp2047p2050.html

Hull does mention that it is numerically most efficient to set
dS = sigma * sqrt(3*dT)
for explicit FD page(422) chap 16
I have seen a simillar such condition in another paper too.



> Hi,
>
> This is more of a numerical question. Is there any rule of thumb for
> choosing assetSteps and timeSteps values for FdAmericanOption? For example
> do they need to grow as time to maturity grows and if yes how (linearly,
> etc.)?
>
> Thanks, Vadim
>