| Article ID: | iaor2004480 |
| Country: | United States |
| Volume: | 22 |
| Issue: | 3 |
| Start Page Number: | 668 |
| End Page Number: | 690 |
| Publication Date: | Aug 1997 |
| Journal: | Mathematics of Operations Research |
| Authors: | Zhang X.L. |
| Keywords: | option pricing, diffusion models |
We discuss pricing formulae for American options in Merton's jump-diffusion model. With the help of variational inequalities, we derive some regularity properties of price functions. Using the finite difference method, a discretization scheme is presented and a convergence theorem for the first order derivatives is proved. Numerical methods and results are also discussed.