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Smooth pasting (also called high-contact condition) is a kind of boundary condition used to model the American option.[1] It tells that the American option value is maximized by an exercise strategy that makes the option value and option delta continuous. [2]
References
[edit]- Sources
- Seydel, Rüdiger. Tools for Computational Finance. pp. 143–145. ISBN 3-540-40604-2.
- Wilmott, Paul. Paul Wilmott on Quantitative Finance. Wiley. pp. 154–155. ISBN 0-470-01870-4.
