A Radial Point Interpolation Method for Pricing Options on a Dividend Paying Asset | Zendy

O. Abdelmgid | Zendy

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A Radial Point Interpolation Method for Pricing Options on a Dividend Paying Asset

Author(s) -

O. Abdelmgid

Publication year - 2017

Publication title -

international journal of computer applications

Language(s) - English

Resource type - Journals

ISSN - 0975-8887

DOI - 10.5120/ijca2017915180

Subject(s) - computer science , dividend , interpolation (computer graphics) , point (geometry) , asset (computer security) , operations research , finance , artificial intelligence , computer security , mathematics , business , geometry , motion (physics)

We present the radial point interpolation method (RPIM) to solve problems for pricing American and European put options on a dividend paying asset. Using RPIM, we get a system of ordinary differential equations which is then solved by a time integration methods . To resolve the difficulties associated with solving the free boundary problem associated with American options, we use a penalty approach. Numerical experiments are presented which prove the computational efficiency of the RPIM.

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