Abstract: Science Set Journal of Physics

Abstract:
The paper seeks to compare the use of Gauss-Seidel method and Pseudo Inversion method for evaluating American option under Black-Scholes model, through a drifted financial derivative system, discretized from Black-Scholes financial PDE. In particular, we conducted a numerical analysis of the methods in order to give a better understanding of the numerical problems associated with the valuation of the options. Some numerical difficulties are discussed by illustrative example.