Numerical methods applied to option pricing models with transaction costs and stochastic volatility

Maria C. Mariani, Indranil SenGupta and Granville Sewell

Quantitative Finance, 2015, vol. 15, issue 8, 1417-1424

Abstract: In this paper, we solve a complex partial differential equation motivated by applications in finance where the solution of the system gives the price of European options, including transaction costs and stochastic volatility. The model is based on theoretical analysis, and the resulting differential equation is solved using PDE2D software. The stability analysis agrees well with experimental results.

Date: 2015
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DOI: 10.1080/14697688.2015.1032548

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