The Correction of Multiscale Stochastic Volatility to American Put Option: An Asymptotic Approximation and Finite Difference Approach

<div>Comparison of American put value and moving boundary for fixed <svg height="12.7569pt" id="M201" style="vertical-align:-0.2063999pt" version="1.1" viewbox="-0.0498162 -12.5505 43.5344 12.7569" width="43.5344pt" xmlns="http://www.w3.org/2000/svg" xmlns:xlink="http://www.w3.org/1999/xlink"><rect height="0.65243" width="6.74619" x="0" y="-11.8482"></rect><g transform="matrix(.013,0,0,-0.013,0,0)"><path d="M494 514C482 587 419 712 303 712C238 712 174 667 174 603C174 561 205 514 249 449C219 438 187 422 162 407C93 366 23 283 23 177C23 69 87 -12 190 -12C244 -12 288 5 328 33C406 87 444 170 444 249C444 329 404 391 331 475C265 550 222 605 222 627C222 647 238 657 267 657C355 657 421 585 484 499L494 514ZM359 234C359 143 319 30 219 30C172 30 114 75 114 178C114 275 163 343 195 378C212 397 241 415 269 425C305 382 359 313 359 234Z"></path></g><g transform="matrix(.013,0,0,-0.013,10.378,0)"><path d="M535 323V373H52V323H535ZM535 138V188H52V138H535Z"></path></g><g transform="matrix(.013,0,0,-0.013,21.641,0)"><path d="M241 635C89 635 35 457 35 312C35 153 89 -12 240 -12C390 -12 443 166 443 312C443 466 390 635 241 635ZM238 602C329 602 354 454 354 312C354 172 330 22 240 22C152 22 124 173 124 313S148 602 238 602Z"></path></g><g transform="matrix(.013,0,0,-0.013,27.881,0)"><path d="M113 -12C146 -12 170 11 170 46C170 78 146 103 114 103S58 78 58 46C58 11 82 -12 113 -12Z"></path></g><g transform="matrix(.013,0,0,-0.013,30.845,0)"><path d="M412 140C382 77 369 73 315 73H129L270 222C362 320 402 379 402 466C402 571 322 635 234 635C177 635 130 609 99 576L42 495L64 475C90 514 133 568 201 568C274 568 318 519 318 435C318 349 255 267 193 193C144 135 87 78 32 23V0H405C417 45 427 89 440 131L412 140Z"></path></g><g transform="matrix(.013,0,0,-0.013,37.085,0)"><path d="M153 550H386L412 615L406 623H120L82 318C104 327 142 338 184 338C294 338 347 275 347 187C347 112 305 39 221 39C160 39 119 71 97 89C88 97 80 96 71 90C59 80 50 67 49 57C48 45 52 36 66 23C80 9 123 -12 169 -12C221 -11 288 15 342 59C403 109 431 165 431 225C431 308 366 395 238 395C212 395 165 379 127 364L153 550Z"></path></g></svg> with different interest rates.</div>

Journal of Function Spaces

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Figure 2

Figure 2: The Correction of Multiscale Stochastic Volatility to American Put Option: An Asymptotic Approximation and Finite Difference Approach 