An efficient and provable sequential quadratic programming method for American and swing option pricing
A sequential quadratic programming numerical method is proposed for American option pricing based on the variational inequality formulation. The variational inequality is discretized using the θ-method in time and the finite element method in space. The resulting system of algebraic inequalities at...
Uloženo v:
| Vydáno v: | European journal of operational research Ročník 316; číslo 1; s. 19 - 35 |
|---|---|
| Hlavní autoři: | , , |
| Médium: | Journal Article |
| Jazyk: | angličtina |
| Vydáno: |
Elsevier B.V
01.07.2024
|
| Témata: | |
| ISSN: | 0377-2217 |
| On-line přístup: | Získat plný text |
| Tagy: |
Přidat tag
Žádné tagy, Buďte první, kdo vytvoří štítek k tomuto záznamu!
|
| Abstract | A sequential quadratic programming numerical method is proposed for American option pricing based on the variational inequality formulation. The variational inequality is discretized using the θ-method in time and the finite element method in space. The resulting system of algebraic inequalities at each time step is solved through a sequence of box-constrained quadratic programming problems, with the latter being solved by a globally and quadratically convergent, large-scale suitable reflective Newton method. It is proved that the sequence of quadratic programming problems converges with a constant rate under a mild condition on the time step size. The method is general in solving the variational inequalities for the option pricing with many styles of optimal stopping and complex underlying asset models. In particular, swing options and stochastic volatility and jump diffusion models are studied. Numerical examples are presented to confirm the effectiveness of the method.
•A fast sequential quadratic programming method (SQPM) is developed.•The convergence of the SQPM is proved.•The SQPM can solve non-symmetric variational inequalities.•The SQPM is efficient for solving general classes of American and swing options. |
|---|---|
| AbstractList | A sequential quadratic programming numerical method is proposed for American option pricing based on the variational inequality formulation. The variational inequality is discretized using the θ-method in time and the finite element method in space. The resulting system of algebraic inequalities at each time step is solved through a sequence of box-constrained quadratic programming problems, with the latter being solved by a globally and quadratically convergent, large-scale suitable reflective Newton method. It is proved that the sequence of quadratic programming problems converges with a constant rate under a mild condition on the time step size. The method is general in solving the variational inequalities for the option pricing with many styles of optimal stopping and complex underlying asset models. In particular, swing options and stochastic volatility and jump diffusion models are studied. Numerical examples are presented to confirm the effectiveness of the method.
•A fast sequential quadratic programming method (SQPM) is developed.•The convergence of the SQPM is proved.•The SQPM can solve non-symmetric variational inequalities.•The SQPM is efficient for solving general classes of American and swing options. |
| Author | Ma, Jingtang Huang, Weizhang Shen, Jinye |
| Author_xml | – sequence: 1 givenname: Jinye surname: Shen fullname: Shen, Jinye email: jyshen@swufe.edu.cn organization: School of Mathematics, Southwestern University of Finance and Economics, Chengdu, Sichuan, China – sequence: 2 givenname: Weizhang surname: Huang fullname: Huang, Weizhang email: whuang@ku.edu organization: Department of Mathematics, University of Kansas, Lawrence, Kansas, USA – sequence: 3 givenname: Jingtang surname: Ma fullname: Ma, Jingtang email: mjt@swufe.edu.cn organization: School of Mathematics, Southwestern University of Finance and Economics, Chengdu, Sichuan, China |
| BookMark | eNp9kMtOwzAQRb0oEm3hB1j5BxLsOHFqiU1V8ZIqsYG15dqT4CixW9st4u9JKCsWXY00o3N15yzQzHkHCN1RklNC-X2XQ-dDXpCC5ZTmhBYzNCesrrOioPU1WsTYEUJoRas5atcOQ9NYbcElrJzB--BPatcDjnA4jkurenw4KhNUsnq6tkENg3UtHiB9eoMbH_B6gGC1cr8J8Wu6-n2y3o3AmO3aG3TVqD7C7d9coo-nx_fNS7Z9e37drLeZZoKkTFQKgOmyqZRgq6YBzrhihnFuFBViJypeFMBEyTQhUHJSEy1ExTSAKA03bIlW51wdfIwBGqltUlOTFJTtJSVykiQ7OUmSkyRJqRwljWjxDx27Dyp8X4YezhCMT50sBBknlRqMDaCTNN5ewn8AD46HHw |
| CitedBy_id | crossref_primary_10_1007_s10614_024_10725_y crossref_primary_10_1007_s10614_024_10623_3 crossref_primary_10_3390_math13122031 |
| Cites_doi | 10.1111/j.1467-9965.1992.tb00040.x 10.1093/rfs/9.1.277 10.1137/0713050 10.1016/0304-405X(76)90022-2 10.21314/JCF.1998.018 10.1007/s10915-017-0423-x 10.1007/s10915-020-01137-9 10.1016/j.amc.2017.03.038 10.1214/aoap/1060202832 10.1016/j.cam.2008.12.018 10.1016/j.ejor.2020.11.050 10.1137/S0036142900370137 10.1016/S0165-1889(97)00029-8 10.1016/j.aml.2004.06.010 10.1016/j.jbankfin.2005.04.017 10.4208/jcm.1307-m4063 10.1016/j.jedc.2021.104145 10.21314/JCF.2002.085 10.1090/S0025-5718-1977-0438707-8 10.1007/BF02591891 10.1093/rfs/3.4.547 10.1287/mnsc.48.7.917.2815 10.1111/j.1467-9965.2007.00331.x 10.1137/S1052623494240456 10.1093/rfs/11.3.627 10.1287/opre.1110.0945 10.1093/rfs/6.2.327 10.1093/rfs/9.4.1211 10.1016/j.ejor.2019.09.009 10.1137/0309028 10.1093/rfs/11.3.597 10.1063/1.3241350 10.1016/j.ejor.2020.02.006 10.1016/j.jedc.2019.103729 10.1137/S0036141003437708 10.1016/j.jedc.2007.01.016 10.1016/j.apnum.2021.11.002 10.1080/135048697334809 10.1007/BF00047211 10.1142/S0219024909005270 10.1093/rfs/14.1.113 10.1007/BF01390130 10.1002/num.20239 10.1137/17M1158872 |
| ContentType | Journal Article |
| Copyright | 2023 |
| Copyright_xml | – notice: 2023 |
| DBID | 6I. AAFTH AAYXX CITATION |
| DOI | 10.1016/j.ejor.2023.11.012 |
| DatabaseName | ScienceDirect Open Access Titles Elsevier:ScienceDirect:Open Access CrossRef |
| DatabaseTitle | CrossRef |
| DatabaseTitleList | |
| DeliveryMethod | fulltext_linktorsrc |
| Discipline | Engineering Computer Science Business |
| EndPage | 35 |
| ExternalDocumentID | 10_1016_j_ejor_2023_11_012 S0377221723008512 |
| GroupedDBID | --K --M -~X .DC .~1 0R~ 1B1 1RT 1~. 1~5 4.4 457 4G. 5GY 5VS 6I. 6OB 7-5 71M 8P~ 9JN 9JO AAAKF AABNK AACTN AAEDT AAEDW AAFTH AAIKJ AAKOC AALRI AAOAW AAQFI AARIN AAXKI AAXUO AAYFN ABAOU ABBOA ABFNM ABFRF ABJNI ABMAC ABUCO ACDAQ ACGFO ACGFS ACIWK ACNCT ACRLP ACZNC ADBBV ADEZE ADGUI AEBSH AEFWE AEIPS AEKER AENEX AFJKZ AFKWA AFTJW AGHFR AGUBO AGYEJ AHHHB AHZHX AIALX AIEXJ AIGVJ AIKHN AITUG AJOXV AKRWK ALMA_UNASSIGNED_HOLDINGS AMFUW AMRAJ ANKPU AOUOD APLSM ARUGR AXJTR BKOJK BKOMP BLXMC CS3 DU5 EBS EFJIC EO8 EO9 EP2 EP3 F5P FDB FIRID FNPLU FYGXN G-Q GBLVA GBOLZ HAMUX IHE J1W KOM LY1 M41 MHUIS MO0 MS~ N9A O-L O9- OAUVE OZT P-8 P-9 P2P PC. PQQKQ Q38 ROL RPZ RXW SCC SDF SDG SDP SDS SES SEW SPC SPCBC SSB SSD SSV SSW SSZ T5K TAE TN5 U5U XPP ZMT ~02 ~G- 1OL 29G 41~ 9DU AAAKG AAQXK AATTM AAYWO AAYXX ABWVN ABXDB ACLOT ACNNM ACRPL ACVFH ADCNI ADIYS ADJOM ADMUD ADNMO ADXHL AEUPX AFFNX AFPUW AGQPQ AI. AIGII AIIUN AKBMS AKYEP APXCP ASPBG AVWKF AZFZN CITATION EFKBS EFLBG EJD FEDTE FGOYB HVGLF HZ~ R2- VH1 WUQ ~HD |
| ID | FETCH-LOGICAL-c390t-95aee3c4f5a938ffe636a3d366da199b95622e3943c00e46070c9953cee94d6d3 |
| ISICitedReferencesCount | 3 |
| ISICitedReferencesURI | http://www.webofscience.com/api/gateway?GWVersion=2&SrcApp=Summon&SrcAuth=ProQuest&DestLinkType=CitingArticles&DestApp=WOS_CPL&KeyUT=001208595500001&url=https%3A%2F%2Fcvtisr.summon.serialssolutions.com%2F%23%21%2Fsearch%3Fho%3Df%26include.ft.matches%3Dt%26l%3Dnull%26q%3D |
| ISSN | 0377-2217 |
| IngestDate | Sat Nov 29 05:34:55 EST 2025 Tue Nov 18 21:49:25 EST 2025 Sat Feb 08 15:52:18 EST 2025 |
| IsDoiOpenAccess | true |
| IsOpenAccess | true |
| IsPeerReviewed | true |
| IsScholarly | true |
| Issue | 1 |
| Keywords | American option Quadratic programming Heston model Jump diffusion Swing option |
| Language | English |
| License | This is an open access article under the CC BY-NC-ND license. |
| LinkModel | OpenURL |
| MergedId | FETCHMERGED-LOGICAL-c390t-95aee3c4f5a938ffe636a3d366da199b95622e3943c00e46070c9953cee94d6d3 |
| OpenAccessLink | https://dx.doi.org/10.1016/j.ejor.2023.11.012 |
| PageCount | 17 |
| ParticipantIDs | crossref_citationtrail_10_1016_j_ejor_2023_11_012 crossref_primary_10_1016_j_ejor_2023_11_012 elsevier_sciencedirect_doi_10_1016_j_ejor_2023_11_012 |
| PublicationCentury | 2000 |
| PublicationDate | 2024-07-01 |
| PublicationDateYYYYMMDD | 2024-07-01 |
| PublicationDate_xml | – month: 07 year: 2024 text: 2024-07-01 day: 01 |
| PublicationDecade | 2020 |
| PublicationTitle | European journal of operational research |
| PublicationYear | 2024 |
| Publisher | Elsevier B.V |
| Publisher_xml | – name: Elsevier B.V |
| References | Gyulov, Koleva (b27) 2022; 172 Recchioni, Lori, Tedeschi, Ouellette (b49) 2021; 293 Adolfsson, Chiarella, Ziogas, Ziveyi (b1) 2013 Nocedal, Wright (b46) 2006 Broadie, Detemple (b4) 1996; 9 Merton (b45) 1976; 3 Allegretto, Lin, Yang (b2) 2001; 39 Dempster, Hutton (b19) 1997; 4 Ikonen, Toivanen (b34) 2008; 24 Coleman, Li, Verma (b15) 2002; 5 Johnson (b36) 1976; 13 Li, Ye (b42) 2019; 107 Chen, Chadam (b9) 2006; 38 Feng, L., Linetsky, V., Morales, J. L., & Nocedal, J. (2009). An algorithm for linear complementarity and its application in American options pricing. Huang, Subrahmanyam, Yu (b32) 1996; 9 (pp. 1400–1402). Hu, Jiang, Liang (b30) 2009; 230 Zhu, Wu, Chern, Sun (b52) 2013 Rannacher (b48) 1984; 43 Chen, Shen (b10) 2020; 82 Jaillet, Lamberton, Lapeyre (b35) 1990; 21 Chen, Zhao (b11) 2013; 31 Carr, Jarrow, Myneni (b8) 1992; 2 Carmona, Touzi (b6) 2008; 18 Carr (b7) 1998; 11 Heston (b28) 1993; 6 Dai, Kwok, You (b18) 2007; 31 Broadie, Glasserman (b5) 1997; 21 Detemple, Tian (b23) 2002; 48 Chockalingam, Muthuraman (b13) 2011; 59 Chiarella, Kang, Meyer, Ziogas (b12) 2009; 12 In Nunes, Ruas, Dias (b47) 2020; 285 Berger, Falk (b3) 1977; 31 Coleman, Li (b14) 1996; 6 Ikonen, Toivanen (b33) 2004; 17 Detemple, Laminou-Abdou, Moraux (b22) 2020; 282 Glowinski (b26) 1984 Zhou, Ma, Sun (b51) 2018; 74 Li, Huang (b41) 2017; 309 Cryer (b16) 1971; 9 Seydel (b50) 2009 Lamberton, Terenzi (b40) 2019; 10 Huang, Pang (b31) 1998; 2 Ju (b37) 1998; 11 Longstaff, Schwartz (b43) 2001; 14 Detemple (b20) 2005 Kim (b39) 1990; 4 Hilber, Reichmann, Schwab, Winter (b29) 2013 Facchinei, Pang (b24) 2003 Khaliq, Voss, Kazmi (b38) 2006; 30 Ma, Yang, Cui (b44) 2021; 128 Detemple, Feng, Tian (b21) 2003; 13 Dafermos (b17) 1983; 26 Facchinei (10.1016/j.ejor.2023.11.012_b24) 2003 Allegretto (10.1016/j.ejor.2023.11.012_b2) 2001; 39 Dempster (10.1016/j.ejor.2023.11.012_b19) 1997; 4 Gyulov (10.1016/j.ejor.2023.11.012_b27) 2022; 172 Chockalingam (10.1016/j.ejor.2023.11.012_b13) 2011; 59 Seydel (10.1016/j.ejor.2023.11.012_b50) 2009 Carmona (10.1016/j.ejor.2023.11.012_b6) 2008; 18 Detemple (10.1016/j.ejor.2023.11.012_b20) 2005 10.1016/j.ejor.2023.11.012_b25 Berger (10.1016/j.ejor.2023.11.012_b3) 1977; 31 Nocedal (10.1016/j.ejor.2023.11.012_b46) 2006 Glowinski (10.1016/j.ejor.2023.11.012_b26) 1984 Zhou (10.1016/j.ejor.2023.11.012_b51) 2018; 74 Carr (10.1016/j.ejor.2023.11.012_b8) 1992; 2 Broadie (10.1016/j.ejor.2023.11.012_b5) 1997; 21 Ju (10.1016/j.ejor.2023.11.012_b37) 1998; 11 Ma (10.1016/j.ejor.2023.11.012_b44) 2021; 128 Jaillet (10.1016/j.ejor.2023.11.012_b35) 1990; 21 Hilber (10.1016/j.ejor.2023.11.012_b29) 2013 Li (10.1016/j.ejor.2023.11.012_b42) 2019; 107 Chen (10.1016/j.ejor.2023.11.012_b11) 2013; 31 Huang (10.1016/j.ejor.2023.11.012_b32) 1996; 9 Detemple (10.1016/j.ejor.2023.11.012_b21) 2003; 13 Broadie (10.1016/j.ejor.2023.11.012_b4) 1996; 9 Detemple (10.1016/j.ejor.2023.11.012_b22) 2020; 282 Rannacher (10.1016/j.ejor.2023.11.012_b48) 1984; 43 Chen (10.1016/j.ejor.2023.11.012_b9) 2006; 38 Chiarella (10.1016/j.ejor.2023.11.012_b12) 2009; 12 Chen (10.1016/j.ejor.2023.11.012_b10) 2020; 82 Longstaff (10.1016/j.ejor.2023.11.012_b43) 2001; 14 Johnson (10.1016/j.ejor.2023.11.012_b36) 1976; 13 Nunes (10.1016/j.ejor.2023.11.012_b47) 2020; 285 Zhu (10.1016/j.ejor.2023.11.012_b52) 2013 Adolfsson (10.1016/j.ejor.2023.11.012_b1) 2013 Detemple (10.1016/j.ejor.2023.11.012_b23) 2002; 48 Kim (10.1016/j.ejor.2023.11.012_b39) 1990; 4 Dai (10.1016/j.ejor.2023.11.012_b18) 2007; 31 Merton (10.1016/j.ejor.2023.11.012_b45) 1976; 3 Coleman (10.1016/j.ejor.2023.11.012_b14) 1996; 6 Coleman (10.1016/j.ejor.2023.11.012_b15) 2002; 5 Khaliq (10.1016/j.ejor.2023.11.012_b38) 2006; 30 Carr (10.1016/j.ejor.2023.11.012_b7) 1998; 11 Cryer (10.1016/j.ejor.2023.11.012_b16) 1971; 9 Lamberton (10.1016/j.ejor.2023.11.012_b40) 2019; 10 Heston (10.1016/j.ejor.2023.11.012_b28) 1993; 6 Huang (10.1016/j.ejor.2023.11.012_b31) 1998; 2 Dafermos (10.1016/j.ejor.2023.11.012_b17) 1983; 26 Hu (10.1016/j.ejor.2023.11.012_b30) 2009; 230 Li (10.1016/j.ejor.2023.11.012_b41) 2017; 309 Recchioni (10.1016/j.ejor.2023.11.012_b49) 2021; 293 Ikonen (10.1016/j.ejor.2023.11.012_b33) 2004; 17 Ikonen (10.1016/j.ejor.2023.11.012_b34) 2008; 24 |
| References_xml | – volume: 31 start-page: 522 year: 2013 end-page: 531 ident: b11 article-title: Estimations of the constants in inverse inequality for finite element functions publication-title: Journal of Computational Mathematics – year: 2013 ident: b52 article-title: Derivative securities and difference methods – volume: 31 start-page: 619 year: 1977 end-page: 628 ident: b3 article-title: An error estimate for the truncation method for the solution of parabolic obstacle variational inequalities publication-title: Mathematics of Computation – volume: 11 start-page: 597 year: 1998 end-page: 626 ident: b7 article-title: Randomization and the American put publication-title: Review of Financial Studies – volume: 4 start-page: 1 year: 1997 end-page: 20 ident: b19 article-title: Fast numerical valuation of American, exotic and complex options publication-title: Applied Mathematical Finance – volume: 2 start-page: 87 year: 1992 end-page: 106 ident: b8 article-title: Alternative characterizations of American put options publication-title: Mathematical Finance – volume: 17 start-page: 809 year: 2004 end-page: 814 ident: b33 article-title: Operator splitting methods for American option pricing publication-title: Applied Mathematics Letters – year: 1984 ident: b26 article-title: Numerical methods for nonlinear variational problems – volume: 107 year: 2019 ident: b42 article-title: Pricing and exercising American options: an asymptotic expansion approach publication-title: Journal of Economic Dynamics and Control – volume: 31 start-page: 3860 year: 2007 end-page: 3880 ident: b18 article-title: Intensity-based framework and penalty formulation of optimal stopping problems publication-title: Journal of Economic Dynamics and Control – volume: 14 start-page: 113 year: 2001 end-page: 147 ident: b43 article-title: Valuing American options by simulation: a simple least-squares approach publication-title: Review of Financial Studies – volume: 285 start-page: 753 year: 2020 end-page: 766 ident: b47 article-title: Early exercise boundaries for American-style knock-out options publication-title: European Journal of Operational Research – volume: 293 start-page: 336 year: 2021 end-page: 360 ident: b49 article-title: The complete Gaussian kernel in the multi-factor heston model: Option pricing and implied volatility applications publication-title: European Journal of Operational Research – year: 2003 ident: b24 article-title: Finite-dimensional variational inequalities and complementarity problems, Volume 1 and 2 – volume: 2 start-page: 31 year: 1998 end-page: 60 ident: b31 article-title: Option pricng and linear complementarity publication-title: Journal of Computational Finance – volume: 21 start-page: 1323 year: 1997 end-page: 1352 ident: b5 article-title: Pricing American-style securities using simulation publication-title: Journal of Economic Dynamics and Control – volume: 10 start-page: 261 year: 2019 end-page: 308 ident: b40 article-title: Variational formulation of American option prices in the Heston model publication-title: SIAM Journal on Financial Mathematics – volume: 6 start-page: 327 year: 1993 end-page: 343 ident: b28 article-title: A closed-form solution for options with stochastic volatility with applications to bond and currency options publication-title: Review of Financial Studies – volume: 24 start-page: 104 year: 2008 end-page: 126 ident: b34 article-title: Efficient numerical methods for pricing American options under stochastic volatility publication-title: Numerical Methods for Partial Differential Equations – volume: 172 start-page: 525 year: 2022 end-page: 545 ident: b27 article-title: Penalty method for indifference pricing of American option in a liquidity switching market publication-title: Applied Numerical Mathematics – volume: 309 start-page: 49 year: 2017 end-page: 67 ident: b41 article-title: A study on nonnegativity preservation in finite element approximation of Nagumo-type nonlinear differential equations publication-title: Applied Mathematics and Computation – volume: 12 start-page: 393 year: 2009 end-page: 425 ident: b12 article-title: The evaluation of American option prices under stochastic volatility and jump-diffusion dynamics using the method of lines publication-title: International Journal of Theoretical and Applied Finance – volume: 4 start-page: 547 year: 1990 end-page: 572 ident: b39 article-title: The analytic valuation of American options publication-title: Review of Financial Studies – volume: 39 start-page: 834 year: 2001 end-page: 857 ident: b2 article-title: Finite element error estimates for a nonlocal problem in American option valuation publication-title: SIAM Journal on Numerical Analysis – volume: 11 start-page: 627 year: 1998 end-page: 646 ident: b37 article-title: Pricing by American option by approximating its early exercise boundary as a multi-piece exponential function publication-title: Review of Financial Studies – volume: 21 start-page: 263 year: 1990 end-page: 289 ident: b35 article-title: Variational inequalities and the pricing of American options publication-title: Acta Applicandae Mathematicae – volume: 38 start-page: 1613 year: 2006 end-page: 1641 ident: b9 article-title: A mathematical analysis of the optimal exercise boundary American put options publication-title: SIAM Journal on Mathematical Analysis – volume: 13 start-page: 599 year: 1976 end-page: 606 ident: b36 article-title: A convergence estimate for an approximation of a parabolic variational inequality publication-title: SIAM Journal on Numerical Analysis – volume: 30 start-page: 489 year: 2006 end-page: 502 ident: b38 article-title: A linear implicit predictor-correcto scheme for pricing American options using a penalty method approach publication-title: Journal of Banking and Finance – year: 2005 ident: b20 article-title: American-style derivatives: valuation and computation – year: 2013 ident: b1 article-title: Representation and numerical approximation of American option prices under heston stochastic volatility dynamics – volume: 282 start-page: 363 year: 2020 end-page: 385 ident: b22 article-title: American step options publication-title: European Journal of Operational Research – year: 2006 ident: b46 article-title: Numerical optimization – volume: 9 start-page: 277 year: 1996 end-page: 300 ident: b32 article-title: Pricing and hedging American options: A recursive integration method publication-title: Review of Financial Studies – volume: 230 start-page: 583 year: 2009 end-page: 599 ident: b30 article-title: Optimal convergence rate of the explicit finite difference scheme for American option valuation publication-title: Journal of Computational and Applied Mathematics – volume: 48 start-page: 917 year: 2002 end-page: 937 ident: b23 article-title: The valuation of American options for a class of diffusion processes publication-title: Management Science – volume: 59 start-page: 793 year: 2011 end-page: 809 ident: b13 article-title: American options under stochastic volatility publication-title: Operations Research – reference: Feng, L., Linetsky, V., Morales, J. L., & Nocedal, J. (2009). An algorithm for linear complementarity and its application in American options pricing. – volume: 13 start-page: 953 year: 2003 end-page: 983 ident: b21 article-title: The valuation of American call options on the minimum of two dividend-paying assets publication-title: Annals of Applied Probability – volume: 128 year: 2021 ident: b44 article-title: CTMC integral equation method for American options under stochastic local volatility models publication-title: Journal of Economic Dynamics and Control – year: 2009 ident: b50 publication-title: Tools for computational finance – volume: 9 start-page: 385 year: 1971 end-page: 392 ident: b16 article-title: The solution of a quadratic programming problem using systematic overrelaxation publication-title: SIAM Journal on Control – volume: 82 year: 2020 ident: b10 article-title: Stability and error analysis of operator splitting methods for American options under the Black–Scholes model publication-title: Journal of Scientific Computing – volume: 26 start-page: 40 year: 1983 end-page: 47 ident: b17 article-title: An iterative scheme for variational inequalities publication-title: Mathematical Programming – volume: 6 start-page: 1040 year: 1996 end-page: 1058 ident: b14 article-title: A reflective Newton method for minimizing a quadratic function subject to bounds on some of the variables publication-title: SIAM Journal on Optimization – volume: 74 start-page: 49 year: 2018 end-page: 69 ident: b51 article-title: Fast Laplace transform methods for free-boundary problems of fractional diffusion equations publication-title: Journal of Scientific Computing – reference: (pp. 1400–1402). – reference: , In – year: 2013 ident: b29 article-title: Computational methods for quantitative finance: finite element methods for derivative pricing – volume: 5 start-page: 51 year: 2002 end-page: 78 ident: b15 article-title: A Newton method for American option pricing publication-title: Journal of Computational Finance – volume: 43 start-page: 309 year: 1984 end-page: 327 ident: b48 article-title: Finite element solution of diffusion problems with irregular data publication-title: Numerische Mathematik – volume: 3 start-page: 125 year: 1976 end-page: 144 ident: b45 article-title: Option pricing when underlying stock returns are discontinuous publication-title: Journal of Financial Economics – volume: 18 start-page: 239 year: 2008 end-page: 268 ident: b6 article-title: Optimal multiple stopping and valuation of swing options publication-title: Mathematical Finance – volume: 9 start-page: 1211 year: 1996 end-page: 1250 ident: b4 article-title: American option valuation: new bounds, approximations, and a comparison of existing methods publication-title: Review of Financial Studies – volume: 2 start-page: 87 year: 1992 ident: 10.1016/j.ejor.2023.11.012_b8 article-title: Alternative characterizations of American put options publication-title: Mathematical Finance doi: 10.1111/j.1467-9965.1992.tb00040.x – volume: 9 start-page: 277 year: 1996 ident: 10.1016/j.ejor.2023.11.012_b32 article-title: Pricing and hedging American options: A recursive integration method publication-title: Review of Financial Studies doi: 10.1093/rfs/9.1.277 – volume: 13 start-page: 599 year: 1976 ident: 10.1016/j.ejor.2023.11.012_b36 article-title: A convergence estimate for an approximation of a parabolic variational inequality publication-title: SIAM Journal on Numerical Analysis doi: 10.1137/0713050 – volume: 3 start-page: 125 year: 1976 ident: 10.1016/j.ejor.2023.11.012_b45 article-title: Option pricing when underlying stock returns are discontinuous publication-title: Journal of Financial Economics doi: 10.1016/0304-405X(76)90022-2 – year: 2013 ident: 10.1016/j.ejor.2023.11.012_b29 – volume: 2 start-page: 31 year: 1998 ident: 10.1016/j.ejor.2023.11.012_b31 article-title: Option pricng and linear complementarity publication-title: Journal of Computational Finance doi: 10.21314/JCF.1998.018 – volume: 74 start-page: 49 year: 2018 ident: 10.1016/j.ejor.2023.11.012_b51 article-title: Fast Laplace transform methods for free-boundary problems of fractional diffusion equations publication-title: Journal of Scientific Computing doi: 10.1007/s10915-017-0423-x – year: 2006 ident: 10.1016/j.ejor.2023.11.012_b46 – volume: 82 year: 2020 ident: 10.1016/j.ejor.2023.11.012_b10 article-title: Stability and error analysis of operator splitting methods for American options under the Black–Scholes model publication-title: Journal of Scientific Computing doi: 10.1007/s10915-020-01137-9 – volume: 309 start-page: 49 year: 2017 ident: 10.1016/j.ejor.2023.11.012_b41 article-title: A study on nonnegativity preservation in finite element approximation of Nagumo-type nonlinear differential equations publication-title: Applied Mathematics and Computation doi: 10.1016/j.amc.2017.03.038 – volume: 13 start-page: 953 year: 2003 ident: 10.1016/j.ejor.2023.11.012_b21 article-title: The valuation of American call options on the minimum of two dividend-paying assets publication-title: Annals of Applied Probability doi: 10.1214/aoap/1060202832 – volume: 230 start-page: 583 year: 2009 ident: 10.1016/j.ejor.2023.11.012_b30 article-title: Optimal convergence rate of the explicit finite difference scheme for American option valuation publication-title: Journal of Computational and Applied Mathematics doi: 10.1016/j.cam.2008.12.018 – volume: 293 start-page: 336 year: 2021 ident: 10.1016/j.ejor.2023.11.012_b49 article-title: The complete Gaussian kernel in the multi-factor heston model: Option pricing and implied volatility applications publication-title: European Journal of Operational Research doi: 10.1016/j.ejor.2020.11.050 – volume: 39 start-page: 834 year: 2001 ident: 10.1016/j.ejor.2023.11.012_b2 article-title: Finite element error estimates for a nonlocal problem in American option valuation publication-title: SIAM Journal on Numerical Analysis doi: 10.1137/S0036142900370137 – volume: 21 start-page: 1323 year: 1997 ident: 10.1016/j.ejor.2023.11.012_b5 article-title: Pricing American-style securities using simulation publication-title: Journal of Economic Dynamics and Control doi: 10.1016/S0165-1889(97)00029-8 – year: 2005 ident: 10.1016/j.ejor.2023.11.012_b20 – volume: 17 start-page: 809 year: 2004 ident: 10.1016/j.ejor.2023.11.012_b33 article-title: Operator splitting methods for American option pricing publication-title: Applied Mathematics Letters doi: 10.1016/j.aml.2004.06.010 – volume: 30 start-page: 489 year: 2006 ident: 10.1016/j.ejor.2023.11.012_b38 article-title: A linear implicit predictor-correcto scheme for pricing American options using a penalty method approach publication-title: Journal of Banking and Finance doi: 10.1016/j.jbankfin.2005.04.017 – volume: 31 start-page: 522 year: 2013 ident: 10.1016/j.ejor.2023.11.012_b11 article-title: Estimations of the constants in inverse inequality for finite element functions publication-title: Journal of Computational Mathematics doi: 10.4208/jcm.1307-m4063 – year: 1984 ident: 10.1016/j.ejor.2023.11.012_b26 – volume: 128 year: 2021 ident: 10.1016/j.ejor.2023.11.012_b44 article-title: CTMC integral equation method for American options under stochastic local volatility models publication-title: Journal of Economic Dynamics and Control doi: 10.1016/j.jedc.2021.104145 – volume: 5 start-page: 51 year: 2002 ident: 10.1016/j.ejor.2023.11.012_b15 article-title: A Newton method for American option pricing publication-title: Journal of Computational Finance doi: 10.21314/JCF.2002.085 – volume: 31 start-page: 619 year: 1977 ident: 10.1016/j.ejor.2023.11.012_b3 article-title: An error estimate for the truncation method for the solution of parabolic obstacle variational inequalities publication-title: Mathematics of Computation doi: 10.1090/S0025-5718-1977-0438707-8 – volume: 26 start-page: 40 year: 1983 ident: 10.1016/j.ejor.2023.11.012_b17 article-title: An iterative scheme for variational inequalities publication-title: Mathematical Programming doi: 10.1007/BF02591891 – year: 2003 ident: 10.1016/j.ejor.2023.11.012_b24 – volume: 4 start-page: 547 year: 1990 ident: 10.1016/j.ejor.2023.11.012_b39 article-title: The analytic valuation of American options publication-title: Review of Financial Studies doi: 10.1093/rfs/3.4.547 – volume: 48 start-page: 917 year: 2002 ident: 10.1016/j.ejor.2023.11.012_b23 article-title: The valuation of American options for a class of diffusion processes publication-title: Management Science doi: 10.1287/mnsc.48.7.917.2815 – volume: 18 start-page: 239 year: 2008 ident: 10.1016/j.ejor.2023.11.012_b6 article-title: Optimal multiple stopping and valuation of swing options publication-title: Mathematical Finance doi: 10.1111/j.1467-9965.2007.00331.x – volume: 6 start-page: 1040 year: 1996 ident: 10.1016/j.ejor.2023.11.012_b14 article-title: A reflective Newton method for minimizing a quadratic function subject to bounds on some of the variables publication-title: SIAM Journal on Optimization doi: 10.1137/S1052623494240456 – volume: 11 start-page: 627 year: 1998 ident: 10.1016/j.ejor.2023.11.012_b37 article-title: Pricing by American option by approximating its early exercise boundary as a multi-piece exponential function publication-title: Review of Financial Studies doi: 10.1093/rfs/11.3.627 – year: 2013 ident: 10.1016/j.ejor.2023.11.012_b1 – volume: 59 start-page: 793 year: 2011 ident: 10.1016/j.ejor.2023.11.012_b13 article-title: American options under stochastic volatility publication-title: Operations Research doi: 10.1287/opre.1110.0945 – volume: 6 start-page: 327 year: 1993 ident: 10.1016/j.ejor.2023.11.012_b28 article-title: A closed-form solution for options with stochastic volatility with applications to bond and currency options publication-title: Review of Financial Studies doi: 10.1093/rfs/6.2.327 – volume: 9 start-page: 1211 year: 1996 ident: 10.1016/j.ejor.2023.11.012_b4 article-title: American option valuation: new bounds, approximations, and a comparison of existing methods publication-title: Review of Financial Studies doi: 10.1093/rfs/9.4.1211 – volume: 282 start-page: 363 year: 2020 ident: 10.1016/j.ejor.2023.11.012_b22 article-title: American step options publication-title: European Journal of Operational Research doi: 10.1016/j.ejor.2019.09.009 – volume: 9 start-page: 385 year: 1971 ident: 10.1016/j.ejor.2023.11.012_b16 article-title: The solution of a quadratic programming problem using systematic overrelaxation publication-title: SIAM Journal on Control doi: 10.1137/0309028 – volume: 11 start-page: 597 year: 1998 ident: 10.1016/j.ejor.2023.11.012_b7 article-title: Randomization and the American put publication-title: Review of Financial Studies doi: 10.1093/rfs/11.3.597 – ident: 10.1016/j.ejor.2023.11.012_b25 doi: 10.1063/1.3241350 – volume: 285 start-page: 753 year: 2020 ident: 10.1016/j.ejor.2023.11.012_b47 article-title: Early exercise boundaries for American-style knock-out options publication-title: European Journal of Operational Research doi: 10.1016/j.ejor.2020.02.006 – volume: 107 year: 2019 ident: 10.1016/j.ejor.2023.11.012_b42 article-title: Pricing and exercising American options: an asymptotic expansion approach publication-title: Journal of Economic Dynamics and Control doi: 10.1016/j.jedc.2019.103729 – year: 2009 ident: 10.1016/j.ejor.2023.11.012_b50 – volume: 38 start-page: 1613 year: 2006 ident: 10.1016/j.ejor.2023.11.012_b9 article-title: A mathematical analysis of the optimal exercise boundary American put options publication-title: SIAM Journal on Mathematical Analysis doi: 10.1137/S0036141003437708 – volume: 31 start-page: 3860 year: 2007 ident: 10.1016/j.ejor.2023.11.012_b18 article-title: Intensity-based framework and penalty formulation of optimal stopping problems publication-title: Journal of Economic Dynamics and Control doi: 10.1016/j.jedc.2007.01.016 – volume: 172 start-page: 525 year: 2022 ident: 10.1016/j.ejor.2023.11.012_b27 article-title: Penalty method for indifference pricing of American option in a liquidity switching market publication-title: Applied Numerical Mathematics doi: 10.1016/j.apnum.2021.11.002 – volume: 4 start-page: 1 year: 1997 ident: 10.1016/j.ejor.2023.11.012_b19 article-title: Fast numerical valuation of American, exotic and complex options publication-title: Applied Mathematical Finance doi: 10.1080/135048697334809 – volume: 21 start-page: 263 year: 1990 ident: 10.1016/j.ejor.2023.11.012_b35 article-title: Variational inequalities and the pricing of American options publication-title: Acta Applicandae Mathematicae doi: 10.1007/BF00047211 – year: 2013 ident: 10.1016/j.ejor.2023.11.012_b52 – volume: 12 start-page: 393 year: 2009 ident: 10.1016/j.ejor.2023.11.012_b12 article-title: The evaluation of American option prices under stochastic volatility and jump-diffusion dynamics using the method of lines publication-title: International Journal of Theoretical and Applied Finance doi: 10.1142/S0219024909005270 – volume: 14 start-page: 113 year: 2001 ident: 10.1016/j.ejor.2023.11.012_b43 article-title: Valuing American options by simulation: a simple least-squares approach publication-title: Review of Financial Studies doi: 10.1093/rfs/14.1.113 – volume: 43 start-page: 309 year: 1984 ident: 10.1016/j.ejor.2023.11.012_b48 article-title: Finite element solution of diffusion problems with irregular data publication-title: Numerische Mathematik doi: 10.1007/BF01390130 – volume: 24 start-page: 104 year: 2008 ident: 10.1016/j.ejor.2023.11.012_b34 article-title: Efficient numerical methods for pricing American options under stochastic volatility publication-title: Numerical Methods for Partial Differential Equations doi: 10.1002/num.20239 – volume: 10 start-page: 261 year: 2019 ident: 10.1016/j.ejor.2023.11.012_b40 article-title: Variational formulation of American option prices in the Heston model publication-title: SIAM Journal on Financial Mathematics doi: 10.1137/17M1158872 |
| SSID | ssj0001515 |
| Score | 2.4842741 |
| Snippet | A sequential quadratic programming numerical method is proposed for American option pricing based on the variational inequality formulation. The variational... |
| SourceID | crossref elsevier |
| SourceType | Enrichment Source Index Database Publisher |
| StartPage | 19 |
| SubjectTerms | American option Heston model Jump diffusion Quadratic programming Swing option |
| Title | An efficient and provable sequential quadratic programming method for American and swing option pricing |
| URI | https://dx.doi.org/10.1016/j.ejor.2023.11.012 |
| Volume | 316 |
| WOSCitedRecordID | wos001208595500001&url=https%3A%2F%2Fcvtisr.summon.serialssolutions.com%2F%23%21%2Fsearch%3Fho%3Df%26include.ft.matches%3Dt%26l%3Dnull%26q%3D |
| hasFullText | 1 |
| inHoldings | 1 |
| isFullTextHit | |
| isPrint | |
| journalDatabaseRights | – providerCode: PRVESC databaseName: Elsevier SD Freedom Collection Journals 2021 issn: 0377-2217 databaseCode: AIEXJ dateStart: 19950105 customDbUrl: isFulltext: true dateEnd: 99991231 titleUrlDefault: https://www.sciencedirect.com omitProxy: false ssIdentifier: ssj0001515 providerName: Elsevier |
| link | http://cvtisr.summon.serialssolutions.com/2.0.0/link/0/eLvHCXMwtV1Lj9MwELaqLkJw4FFALC_5wA1lldiOEx8rtAg4rJBYRG-R4zhVqyUtIVsWfgU_mfGz3YVdsQcuUWUl7mO-jsefv5lB6KXMa160rWFtMpowLeuk5IImtSBcNYLUKq9ts4ni6KiczcSH0ehXyIXZnBRdV56difV_NTWMgbFN6uw1zB0nhQF4DUaHK5gdrv9k-GlnRBoLm-joywCsNjZBysmmB8ORfz2VTW-LtXqB1hdDGbh20lZ5GE9yLLH-3WqjnXdZ9-Ywfn4ppe_DWxjoA9HoKwpF5vljSAlZdD92gOWp68968dPQ2Fuy3N87H8KopykIi5LWmJ5VFAkhLlEzuF7q8izPYcw5Uu9H3ZLsCpr84ewd77A80MuVqexK6IGpx-pV2ecqa19Y8aIOMUjclpWZozJzwJaoSk3b6j1S5KIco73pu8PZ-7i6mwDQnkz5r-MTsZxm8OIn-XuwsxPAHN9Dd_zOA08dYu6jke4m6GZIfJigu6HBB_b-foJu71SrfIDm0w5HZGHABQ7Iwltk4YgsvIMs7JCFAVk4IMvOYJGFHbKwR9ZD9OnN4fHrt4nv05EoKtIhEbnUmirW5lLQsm01p1zShnLeyEyIGrbghGgqGFVpqhmHVUYJkVOIzwRreEMfoXG36vRjhAvRqCxrwXHIkuUtg_1BKsu2ZFLD1peKfZSFH7RSvoi96aVyUl1uyn30Kj6zdiVcrrw7D3aqfBDqgssKYHfFc0-u9S5P0a3tn-QZGg_9qX6ObqjNsPjWv_CY-w0PQ6zW |
| linkProvider | Elsevier |
| openUrl | ctx_ver=Z39.88-2004&ctx_enc=info%3Aofi%2Fenc%3AUTF-8&rfr_id=info%3Asid%2Fsummon.serialssolutions.com&rft_val_fmt=info%3Aofi%2Ffmt%3Akev%3Amtx%3Ajournal&rft.genre=article&rft.atitle=An+efficient+and+provable+sequential+quadratic+programming+method+for+American+and+swing+option+pricing&rft.jtitle=European+journal+of+operational+research&rft.au=Shen%2C+Jinye&rft.au=Huang%2C+Weizhang&rft.au=Ma%2C+Jingtang&rft.date=2024-07-01&rft.issn=0377-2217&rft.volume=316&rft.issue=1&rft.spage=19&rft.epage=35&rft_id=info:doi/10.1016%2Fj.ejor.2023.11.012&rft.externalDBID=n%2Fa&rft.externalDocID=10_1016_j_ejor_2023_11_012 |
| thumbnail_l | http://covers-cdn.summon.serialssolutions.com/index.aspx?isbn=/lc.gif&issn=0377-2217&client=summon |
| thumbnail_m | http://covers-cdn.summon.serialssolutions.com/index.aspx?isbn=/mc.gif&issn=0377-2217&client=summon |
| thumbnail_s | http://covers-cdn.summon.serialssolutions.com/index.aspx?isbn=/sc.gif&issn=0377-2217&client=summon |