An Efficient Algorithm for Pricing American Option Under Kou Jump Diffusion Model
For American option under Kou jump diffusion model,the central difference scheme is used to discretize partial differential operators in spatial direction,Rannacher dis-crete scheme is used for time derivative,an easy-to-implement recursion formula is employed for the approximation of integral term.For the resulting linear complementarity problems ob-tained from the discretization of American option are solved by the modulus-based successive overrelaxation(MSOR)iteration method.The property of the system matrix and convergence of the MSOR method are analyzed.Numerical experiments conform theoretical analysis and further show that the proposed method is efficient and robust.
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