Valuing option on the maximum of two assets using improving modified Gauss-Seidel method

Koh, W.; Muthuvalu, M.S.; Aruchunan, Elayaraja; Sulaiman, J.

doi:10.1063/1.4887582

Access Status

Open access via publisher

Authors

Koh, W.

Muthuvalu, M.S.

Aruchunan, Elayaraja

Sulaiman, J.

Date

2014

Type

Conference Paper

Metadata

Show full item record

Citation

Koh, W. and Muthuvalu, M.S. and Aruchunan, E. and Sulaiman, J. 2014. Valuing option on the maximum of two assets using improving modified Gauss-Seidel method, in 21st National Symposium on Mathematical Sciences: Germination of Mathematical Sciences Education and Research Towards Global Sustainability, SKSM 21, Jun 11 2013. Penang; Malaysia: American Institute of Physics.

Source Title

AIP Conference Proceedings

Source Conference

21st National Symposium on Mathematical Sciences: Germination of Mathematical Sciences Education and Research Towards Global Sustainability, SKSM 21

DOI

10.1063/1.4887582

ISBN

978-073541241-5

School

Department of Mathematics and Statistics

URI

http://hdl.handle.net/20.500.11937/19147

Collection

Curtin Research Publications

Abstract

This paper presents the numerical solution for the option on the maximum of two assets using Improving Modified Gauss-Seidel (IMGS) iterative method. Actually, this option can be governed by two-dimensional Black-Scholes partial differential equation (PDE). The Crank-Nicolson scheme is applied to discretize the Black-Scholes PDE in order to derive a linear system. Then, the IMGS iterative method is formulated to solve the linear system. Numerical experiments involving Gauss-Seidel (GS) and Modified Gauss-Seidel (MGS) iterative methods are implemented as control methods to test the computational efficiency of the IMGS iterative method.