A Cubic B-Spline Collocation Method for Barrier Options under the CEV Model

Xiwei Yu (), Qing Hu and Yudong Sun
Additional contact information
Xiwei Yu: College of Data Science and Information Engineering, Guizhou Minzu University, Guiyang 550025, China
Qing Hu: College of Data Science and Information Engineering, Guizhou Minzu University, Guiyang 550025, China
Yudong Sun: Department of Finance, Guizhou Minzu University, Guiyang 550025, China

Mathematics, 2023, vol. 11, issue 18, 1-18

Abstract: In this paper, we construct a new numerical algorithm for the partial differential equation of up-and-out put barrier options under the CEV model. In this method, we use the Crank-Nicolson scheme to discrete temporal variables and the cubic B-spline collocation method to discrete spatial variables. The method is stable and has second-order convergence for both time and space variables. The convergence analysis of the proposed method is discussed in detail. Finally, numerical examples verify the stability and accuracy of the method.

Keywords: CEV model; barrier options; cubic B-spline; Crank-Nicolson method (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/2227-7390/11/18/3979/pdf (application/pdf)
https://www.mdpi.com/2227-7390/11/18/3979/ (text/html)

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:gam:jmathe:v:11:y:2023:i:18:p:3979-:d:1243005

Access Statistics for this article

Mathematics is currently edited by Ms. Emma He

More articles in Mathematics from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().