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]

References

  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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