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A Radial Point Interpolation Method for Pricing Options on a Dividend Paying Asset
| International Journal of Computer Applications |
| Foundation of Computer Science (FCS), NY, USA |
| Volume 172 - Number 7 |
| Year of Publication: 2017 |
| Authors: Abdelmgid O. M. Sidahmed |
10.5120/ijca2017915180
|
Abdelmgid O. M. Sidahmed . A Radial Point Interpolation Method for Pricing Options on a Dividend Paying Asset. International Journal of Computer Applications. 172, 7 ( Aug 2017), 1-6. DOI=10.5120/ijca2017915180
Abstract
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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