Numerical Solution of American Put Options Pricing with Transaction Cost in the CEV Model

摘要

In order to solve the American put options pricing and its numerical solution problems under the CEV model with transaction cost, by using the Ito formula and the no-arbitrage principle, the American put options pricing model and linear complementarity partial differential equation of the model are derived in this paper. Then the semi-discretization difference scheme for the American put options pricing model is developed, based on using semi-discretization for the spatial variable. Lastly, numerical experiments show that the semi-discretization difference scheme is a stable and convergent algorithm.