Abstract
We discuss a nonlinear multigrid method for a linear complementarity problem. The convergence is improved by a recombination of iterants. The problem under consideration deals with option pricing from mathematical finance. Linear complementarity problems arise from so-called American-style options. A 2D convection-diffusion type operator is discretized with the help of second order upwind discretizations. The properties of smoothers are analyzed with Fourier two-grid analysis. Numerical solutions obtained for the option pricing problem are compared with reference results.
| Original language | English |
|---|---|
| Pages (from-to) | 165-185 |
| Number of pages | 21 |
| Journal | Electronic Transactions on Numerical Analysis |
| Volume | 15 |
| Publication status | Published - 2003 |
| Externally published | Yes |
Keywords
- American-style options
- Fourier analysis
- Iterant recombination
- Linear complementarity problems
- Nonlinear multigrid
- Projected Gauss-Seidel
- Second-order upwind discretization