Parallel option price . . . the Explicit Finite Difference Method

Abstract

We show how computations such as those involved in American or European-style option price valuations with the explicit finite difference method can be performed in parallel. Towards this we introduce a latency tolerant parallel algorithm for performing such computations efficiently that achieves optimal theoretical speedup p, where p is the number of processor of the parallel system. An implementation of the parallel algorithm and evaluation of its performance is carried out by performing an experimental study on a high-latency parallel system consisting of a cluster of 16 PC workstations. Our implementation of the parallel algorithm is not only architecture but also communication library independent: the same code works under LAM-MPI and BSPlib, two libraries that facilitate parallel programming