Parallel Binomial Valuation of American Options with Proportional Transaction Costs

Abstract

We present a multi-threaded parallel algorithm that computes the ask and bid prices of American options with the asset transaction costs being taken into consideration. The parallel algorithm is based on the recombining binomial tree model, and is designed for modern shared-memory multi-core processors. Although parallel pricing algorithms for American options have been well studied, the cases with transaction costs have not been addressed. The parallel algorithm was implemented via POSIX Threads, and was tested. The results demonstrated that the approach was efficient and light-weighted. Reasonable speedups were gained on problems of small sizes.