Message Boards Message Boards


FinancialDerivative: convergence and methods

Posted 3 years ago
0 Replies
0 Total Likes

If I use FinancialDerivative for the American-style put option with no method chosen, but a diagonal choice "GridSize"->{npts,npts}, the method apparently converges as npts increases. My questions:

Q1. With this diagonal choice, can I rely on the convergence being to the correct value?

Q2. I need 7 good digits and, if the answer to Q1 is 'yes', apparently npts = 640,000 suffices for my parameter set. Is there a rule of thumb for how large npts needs to be for d good digits? That is, what is the order of convergence (for the American-style put)?

Q3. Is there any better/recommended relationship between the two values in "GridSize"->{npts1,npts2} for achieving efficient convergence?

Q4. What is going on "under the covers"? The documentation is, for Mathematica, unusually poor on that.

Reply to this discussion
Community posts can be styled and formatted using the Markdown syntax.
Reply Preview
or Discard

Group Abstract Group Abstract