High-order compact finite difference scheme for option pricing in stochastic volatility models

Bertram D\"uring and Michel Fourni\'e
Authors registered in the RePEc Author Service: Bertram Düring

Papers from arXiv.org

Abstract: We 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.

Date: 2014-04
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in J. Comput. Appl. Math. 236(17) (2012), 4462-4473

Downloads: (external link)
http://arxiv.org/pdf/1404.5140 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1404.5140

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().