Abstract: In this paper, we investigate the solution of a two dimensional parabolic free boundary problem. The free boundary of this problem is modelled as a nonlinear integral equation (IE). For this integral equation, we propose an asymptotic solution as time is near to maturity and develop an integral iterative method. The computational results reveal that our asymptotic solution is very close to the numerical solution as time is near to maturity.
Abstract: In this paper, the American exchange option (AEO) valuation problem is modelled as a free boundary problem. The critical stock price for an AEO is satisfied an integral equation implicitly. When the remaining time is large enough, an asymptotic formula is provided for pricing an AEO. The numerical results reveal that our asymptotic pricing formula is robust and accurate for the long-term AEO.