Using meshfree approximation for multi‐asset American options

Abstract We study the applicability of meshfree approximation schemes for the solution of multi‐asset American option problems. In particular, we consider a penalty method which allows us to remove the free and moving boundary by adding a small and continuous penalty term to the Black‐Scholes equation. Time discretization is achieved by a linearly implicit θ method. A comparison with results obtained recently by two of the authors using a linearly implicit finite difference method is included.

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