{"paper":{"title":"On the Use of Policy Iteration as an Easy Way of Pricing American Options","license":"http://arxiv.org/licenses/nonexclusive-distrib/1.0/","headline":"","cross_cats":["math.NA"],"primary_cat":"q-fin.CP","authors_text":"Christoph Reisinger, Jan Hendrik Witte","submitted_at":"2010-12-22T13:57:08Z","abstract_excerpt":"In this paper, we demonstrate that policy iteration, introduced in the context of HJB equations in [Forsyth & Labahn, 2007], is an extremely simple generic algorithm for solving linear complementarity problems resulting from the finite difference and finite element approximation of American options. We show that, in general, O(N) is an upper and lower bound on the number of iterations needed to solve a discrete LCP of size N. If embedded in a class of standard discretisations with M time steps, the overall complexity of American option pricing is indeed only O(N(M+N)), and, therefore, for M N,"},"claims":{"count":0,"items":[],"snapshot_sha256":"258153158e38e3291e3d48162225fcdb2d5a3ed65a07baac614ab91432fd4f57"},"source":{"id":"1012.4976","kind":"arxiv","version":4},"verdict":{"id":null,"model_set":{},"created_at":null,"strongest_claim":"","one_line_summary":"","pipeline_version":null,"weakest_assumption":"","pith_extraction_headline":""},"references":{"count":0,"sample":[],"resolved_work":0,"snapshot_sha256":"258153158e38e3291e3d48162225fcdb2d5a3ed65a07baac614ab91432fd4f57","internal_anchors":0},"formal_canon":{"evidence_count":0,"snapshot_sha256":"258153158e38e3291e3d48162225fcdb2d5a3ed65a07baac614ab91432fd4f57"},"author_claims":{"count":0,"strong_count":0,"snapshot_sha256":"258153158e38e3291e3d48162225fcdb2d5a3ed65a07baac614ab91432fd4f57"},"builder_version":"pith-number-builder-2026-05-17-v1"}