Search results for "Complementarity problem"
showing 10 items of 15 documents
Elastic plastic analysis iterative solution
1998
The step-by-step analysis of finite element elastic plastic structures subjected to an assigned (quasi-static) loading history, is considered; it identifies with the well-known sequence of linear complementarity problems. An iterative technique devoted to solve the relevant linear complementarity problem is presented. It is based on the recursive solution of a suitable linear complementarity problem, deduced from the relevant one and easier than it. The procedure convergency is proved. Some noticing particular cases are examined. The physical meaning of the procedure is shown to be a plastic relaxation. The suitable numerical ranges for some check parameter values, to be utilized in the app…
Operator splitting methods for American option pricing
2004
Abstract We propose operator splitting methods for solving the linear complementarity problems arising from the pricing of American options. The space discretization of the underlying Black-Scholes Scholes equation is done using a central finite-difference scheme. The time discretization as well as the operator splittings are based on the Crank-Nicolson method and the two-step backward differentiation formula. Numerical experiments show that the operator splitting methodology is much more efficient than the projected SOR, while the accuracy of both methods are similar.
An Operator Splitting Method for Pricing American Options
2008
Pricing American options using partial (integro-)differential equation based methods leads to linear complementarity problems (LCPs). The numerical solution of these problems resulting from the Black-Scholes model, Kou’s jump-diffusion model, and Heston’s stochastic volatility model are considered. The finite difference discretization is described. The solutions of the discrete LCPs are approximated using an operator splitting method which separates the linear problem and the early exercise constraint to two fractional steps. The numerical experiments demonstrate that the prices of options can be computed in a few milliseconds on a PC.
The symmetric boundary element method for unilateral contact problems
2008
Abstract On the basis of the boundary integral equation method, in its symmetric formulation, the frictionless unilateral contact between two elastic bodies has been studied. A boundary discretization by boundary elements leads to an algebraic formulation in the form of a linear complementarity problem. In this paper the process of contact or detachment is obtained through a step by step analysis by using generalized (weighted) quantities as the check elements: the detachment or the contact phenomenon may happen when the weighted traction or the weighted displacement is greater than the weighted cohesion or weighted minimum reference gap, respectively. The applications are performed by usin…
Application of Operator Splitting Methods in Finance
2016
Financial derivatives pricing aims to find the fair value of a financial contract on an underlying asset. Here we consider option pricing in the partial differential equations framework. The contemporary models lead to one-dimensional or multidimensional parabolic problems of the convection-diffusion type and generalizations thereof. An overview of various operator splitting methods is presented for the efficient numerical solution of these problems.
An Iterative Approach to Dynamic Elastic-Plastic Analysis
1998
The step-by-step analysis of structures constituted by elastic-plastic finite elements, subjected to an assigned loading history, is here considered. The structure may possess dynamic and/or not dynamic degrees-of-freedom. As it is well-known, at each step of analysis the solution of a linear complementarity problem is required. An iterative method devoted to solving the relevant linear complementarity problem is presented. It is based on the recursive solution of a linear complementarity, problem in which the constraint matrix is block-diagonal and deduced from the matrix of the original linear complementarity problem. The convergence of the procedure is also proved. Some particular cases …
A Comparison and Survey of Finite Difference Methods for Pricing American Options Under Finite Activity Jump-Diffusion Models
2012
Partial-integro differential formulations are often used for pricing American options under jump-diffusion models. A survey on such formulations and numerical methods for them is presented. A detailed description of six efficient methods based on a linear complementarity formulation and finite difference discretizations is given. Numerical experiments compare the performance of these methods for pricing American put options under finite activity jump models.
Frictionless contact-detachment analysis: iterative linear complementarity and quadratic programming approaches.
2012
The object of the paper concerns a consistent formulation of the classical Signorini’s theory regarding the frictionless contact problem between two elastic bodies in the hypothesis of small displacements and strains. The employment of the symmetric Galerkin boundary element method, based on boundary discrete quantities, makes it possible to distinguish two different boundary types, one in contact as the zone of potential detachment, called the real boundary, the other detached as the zone of potential contact, called the virtual boundary. The contact-detachment problem is decomposed into two sub-problems: one is purely elastic, the other regards the contact condition. Following this method…
An Iterative Method for Pricing American Options Under Jump-Diffusion Models
2011
We propose an iterative method for pricing American options under jump-diffusion models. A finite difference discretization is performed on the partial integro-differential equation, and the American option pricing problem is formulated as a linear complementarity problem (LCP). Jump-diffusion models include an integral term, which causes the resulting system to be dense. We propose an iteration to solve the LCPs efficiently and prove its convergence. Numerical examples with Kou's and Merton's jump-diffusion models show that the resulting iteration converges rapidly.
A Projected Algebraic Multigrid Method for Linear Complementarity Problems
2011
We present an algebraic version of an iterative multigrid method for obstacle problems, called projected algebraic multigrid (PAMG) here. We show that classical AMG algorithms can easily be extended to deal with this kind of problem. This paves the way for efficient multigrid solution of obstacle problems with partial differential equations arising, for example, in financial engineering.