Explain Decision features in finite-difference method

Question

Explain the term Decision features in finite-difference methods.

Answer 1

Decision features: In early exercises, chooser features and instalment premiums are all illustrations of embedded decisions saw in exotic contracts. Coping along with these numerically is rather straightforward using finite-difference methods, making such numerical techniques the natural ones for that contract. The dissimilarity between an American and a European option is about three lines of code in a finite-difference program and below a minute’s coding.