Qualitatively Stable Nonstandard Finite Difference Scheme for Numerical Solution of the Nonlinear Black–Scholes Equation

Mohammad Mehdizadeh Khalsaraei, Ali Shokri, Zahra Mohammadnia, Hamid Mohammad Sedighi and Efthymios G. Tsionas

Journal of Mathematics, 2021, vol. 2021, 1-12

Abstract: In this paper, we use a numerical method for solving the nonlinear Black–Scholes partial differential equation of the European option under transaction costs, which is based on the nonstandard discretization of the spatial derivatives. The proposed scheme, in addition to the unconditional positivity, is stable, consistent, and monotone. In order to illustrate the efficiency of the new method, numerical results have been performed by four models.

Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:hin:jjmath:6679484

DOI: 10.1155/2021/6679484

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