MODULUS-BASED SUCCESSIVE OVERRELAXATION METHOD FOR PRICING AMERICAN OPTIONS

We consider the modulus-based successive overrelaxation met- hod for the linear complementarity problems from the discretization of Black-Scholes American options model. The H+-matrix property of the system matrix discretized from American option pricing which guaran- tees the convergence of the proposed method for the linear complementar- ity problem is analyzed. Numerical experiments confirm the theoretical analysis, and further show that the modulus-based successive overrelax- ation method is superior to the classical projected successive overrelaxation method with optimal parameter.

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