Smooth pasting

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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]

1. ^ Seydel, pp. 143–145.
2. ^ Wilmott, pp. 154–155.

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.

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