Efficient hedging in Bates model using high-order compact finite differences

Bertram D\"uring and Alexander Pitkin
Authors registered in the RePEc Author Service: Bertram Düring

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Abstract: We evaluate the hedging performance of a high-order compact finite difference scheme from [4] for option pricing in Bates model. We compare the scheme's hedging performance to standard finite difference methods in different examples. We observe that the new scheme outperforms a standard, second-order central finite difference approximation in all our experiments.

Date: 2017-10
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