A Fast Algorithm for Solving the Pricing of American Options

Abstract

In this paper, we provide a fast algorithm for solving the pricing of American options, which is easier to apply and implement in computer comparing with general difference method. Our research substantially reduces the computational time as well as improves the computational efficiency and accuracy considerably. Furthermore, we propose and implement a numerical procedure for computing the pricing of American options. The algorithm of pricing American options proposed in this paper shows greater improvement over the traditional difference method. Also this method is useful to get other approximate solution on obstacle problem.