| Abstract: |
| In this paper, we introduce a novel approach to solving the American put options pricing model by hugely relying on a front-fixing Crank-Nicolson finite difference method. Since the American put option pricing model is a widely used financial model for valuing an option with the right to sell an underlying asset at a fated price which generally decided in advance. The method we proposed here, solves the problem of early exercise by introducing a front-fixing technique that permits for efficient and accurate valuation of an American put option. As in the comparison to other approaches in the existing literature, we can assert that this method is stable, accurate, and efficient. The results that we obtained here from the numerical experiments demonstrate not only the efficacy of the proposed method but also in accurately pricing American put options with a stable scheme. |
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