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The black PDE for the value of an option on futures is:If I use a discrete version of this PDE to solve the value of an american option using FDM, can i go back to my grid and found the delta simply saying:(V2 - V1)/(F2 - F1) ??Or do i need to include the delta term in the PDE to solve for option using FDM ??THANKS

yes you can use the grid to get the delta. the only reason the delta term drops out of the pde is because the cost of carry on a futures contract is zero

QuoteOriginally posted by: LGOMEZThe black PDE for the value of an option on futures is:If I use a discrete version of this PDE to solve the value of an american option using FDM, can i go back to my grid and found the delta simply saying:(V2 - V1)/(F2 - F1) ??Or do i need to include the delta term in the PDE to solve for option using FDM ??THANKSHow do you handle the free boundary/constraint in your scheme?

Thanks DaveangelFor the boundaries: 2 * Strike = infinity At that point i use linear extrapolation to get the option value.At f = 0 i just discount.THANKS !!