Title: Pricing American put options model with application to oil options

Authors: Hajar Nafia; Imane Agmour; Youssef El Foutayeni; Naceur Achtaich

Addresses: Faculty of Sciences Ben M'Sik, Department of Mathematics and Computer Science, Hassan II University of Casablanca, Casablanca 20070, Morocco ' Faculty of Sciences Ben M'Sik, Department of Mathematics and Computer Science, Hassan II University of Casablanca, Casablanca 20070, Morocco ' Faculty of Sciences Ben M'Sik, Department of Mathematics and Computer Science, Hassan II University of Casablanca, Casablanca 20070, Morocco ' Faculty of Sciences Ben M'Sik, Department of Mathematics and Computer Science, Hassan II University of Casablanca, Casablanca 20070, Morocco

Abstract: In this paper, we reformulate a problem of pricing American put options to linear complementarity problem. The space and the time are discretised with the finite difference method in the Crank-Nickolson approach, which leads to present the put option price as a solution of the linear complementarity problem. For solving this problem and evaluating the put options we use a fast algorithm. We apply our study for an example on oil options.

Keywords: American option; European option; linear complementarity problem; Black-Scholes model; Crank-Nickolson approach; Pricing American put options; oil options; ExxonMobil Corporation; finite difference method; P-matrix.

DOI: 10.1504/IJCSM.2023.130422

International Journal of Computing Science and Mathematics, 2023 Vol.17 No.1, pp.67 - 78

Received: 01 Jun 2020
Accepted: 29 Oct 2020
Published online: 20 Apr 2023 *