Analytical and numerical approximations for the early exercise boundary for american put options

摘要

Several new analytical and numerical approximations are provided for the location of the early exercise boundary for the American put option. The most complete approximation is in the form of an integro-differential equation for which an iterative scheme can be proven to converge to the unique solution. The current methods are compared to those recently proposed by other authors. This paper summarizes various parts of our joint work [8-10] with L. Jiang (Shanghai), R. Stamicar (Toronto) and W. Zheng (Irvine).