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Approximation of the Snell Envelope and AmericanOptions Prices in dimension one

Published online by Cambridge University Press:  15 November 2002

Vlad Bally  and
Bruno Saussereau
Vlad Bally
Affiliation:
Université du Maine, Laboratoire Statistiques et Processus, BP. 535, 72017 Le Mans Cedex, France; bally@ccr.jussieu.fr.
Bruno Saussereau
Affiliation:
Université de Franche-Comté, Laboratoire de Mathématiques de Besançon, 16 route de Gray, 25000 Besançon, France; bruno.saussereau@math.univ-fcomte.fr.
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Abstract

We establish some error estimates for the approximation of an optimal stopping problem along the paths of the Black–Scholes model. This approximation is based on a tree method. Moreover, we give a global approximation result for the related obstacle problem.

Keywords

Dynamic programmingsnell envelopeoptimal stopping.
Type
Research Article
Information
ESAIM: Probability and Statistics , Volume 6: New directions in Time Series Analysis (Guest Editor: Philippe Soulier)New directions in Time Series Analysis (Guest Editor: Philippe Soulier) , 2002 , pp. 1 - 19
Copyright
© EDP Sciences, SMAI, 2002

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