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Re: FdDividendAmericanOption

Posted by Graham Miller-7 on Dec 31, 2004; 9:42am
URL: http://quantlib.414.s1.nabble.com/FdDividendAmericanOption-tp3453p3457.html


Thanks, Joseph for your patch.

I applied it to my code base. Then I thought I'd look at price
convergence versus the number of assetSteps--just for fun--and I came
across an interesting characteristic.  I modified the code I posted
earlier to use every value of assetSteps between 1 and 300.  I attached
a graph of the results.  It's a little hard to tell from the graph, but
the values with an odd number of assetSteps quickly converge to about
2.17. The values with an even number of asset steps diverge a fair
amount before also converging on about 2.17.

Any thoughts?

graham

Joseph Wang wrote:

> I think the basic problem is that when you turn x = log(S) into an
> operator,
> dx = dS / S and you start getting extra terms in the difference
> equation that
> aren't being put into BSMOperator.  One could go and work out what the
> operator should be with a logarithmic grid, but I suspect that the second
> derivative is going to add a lot of nasty terms.
>
>
>


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