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Circulant preconditioners for pricing options

โœ Scribed by Hong-Kui Pang; Ying-Ying Zhang; Seak-Weng Vong; Xiao-Qing Jin

Publisher
Elsevier Science
Year
2011
Tongue
English
Weight
274 KB
Volume
434
Category
Article
ISSN
0024-3795

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โœฆ Synopsis

We use the normalized preconditioned conjugate gradient method with Strang's circulant preconditioner to solve a nonsymmetric Toeplitz system A n x = b, which arises from the discretization of a partial integro-differential equation in option pricing. By using the definition of family of generating functions introduced in [16], we prove that Strang's circulant preconditioner leads to a superlinear convergence rate under certain conditions. Numerical results exemplify our theoretical analysis.

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