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High-order compact finite difference scheme for option pricing in stochastic volatility models
journal contribution
posted on 2023-06-08, 12:00 authored by Bertram Duering, Michel FourniéWe derive a new high-order compact finite difference scheme for option pricing in stochastic volatility models. The scheme is fourth order accurate in space and second order accurate in time. Under some restrictions, theoretical results like unconditional stability in the sense of von Neumann are presented. Where the analysis becomes too involved we validate our findings by a numerical study. Numerical experiments for the European option pricing problem are presented. We observe fourth order convergence for non-smooth payoff.
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Publication status
- Published
Journal
Journal of Computational and Applied MathematicsISSN
0377-0427Publisher
ElsevierExternal DOI
Issue
17Volume
236Page range
4462-4473Department affiliated with
- Mathematics Publications
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- No
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- Yes
Legacy Posted Date
2012-07-05Usage metrics
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