Valuing option on the maximum of two assets using improving modified Gauss-Seidel method

Wei , Sin Koh and Mohana Sundaram Muthuvalu, and Elayaraja Aruchunan, and Jumat Sulaiman, (2014) Valuing option on the maximum of two assets using improving modified Gauss-Seidel method. AIP Conference Proceedings, 1605 . pp. 161-166. ISSN 0094243X

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Official URL: http://dx.doi.org/10.1063/1.4887582

Abstract

This paper presents the numerical solution for the option on the maximum of two assets using Improving Modified Gauss-Seidel (IMGS) iterative method. Actually, this option can be governed by two-dimensional Black-Scholes partial differential equation (PDE). The Crank-Nicolson scheme is applied to discretize the Black-Scholes PDE in order to derive a linear system. Then, the IMGS iterative method is formulated to solve the linear system. Numerical experiments involving Gauss-Seidel (GS) and Modified Gauss-Seidel (MGS) iterative methods are implemented as control methods to test the computational efficiency of the IMGS iterative method.

Item Type:Article
Uncontrolled Keywords:Crank-Nicolson scheme; Improving Modified Gauss-Seidel method; Two-dimensional Black-Scholes equation
Subjects:Q Science > QA Mathematics
ID Code:10126
Deposited By:IR Admin
Deposited On:03 Mar 2015 14:30
Last Modified:03 Mar 2015 14:30

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