We present a method to solve the free-boundary problem that arises in the pricing of classical American options. The method presented herein leverages on a one factor approximation and the moving boundary approach to yield an algorithm which has superior run times and accuracy as compared other...

We consider the instantaneous control of a diffusion process on the real line. Two types of costs are incurred: the holding and transaction costs. The holding cost is incurred at all times at the rate modeled by a convex function of the state. Transactions costs have both a fixed component and a...