Resumen de Optimal convergence rate of the explicit finite difference scheme for American option valuation

Bei Hu, Jin Liang, Lishang Jiang

• An optimal convergence rate O(?x) for an explicit finite difference scheme for a variational inequality problem is obtained under the stability condition using completely PDE methods. As a corollary, a binomial tree scheme of an American put option (where ) is convergent unconditionally with the rate O((?t)1/2).