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High-order compact finite difference schemes for option pricing in stochastic volatility models on non-uniform grids
journal contribution
posted on 2023-06-09, 00:14 authored by Bertram Duering, Michel Fournié, Christof HeuerWe derive high-order compact finite difference schemes for option pricing in stochastic volatility models on non-uniform grids. The schemes are fourth-order accurate in space and second-order accurate in time for vanishing correlation. In our numerical study we obtain high-order numerical convergence also for non-zero correlation and non-smooth payoffs which are typical in option pricing. In all numerical experiments a comparative standard second-order discretisation is significantly outperformed. We conduct a numerical stability study which indicates unconditional stability of the scheme.
History
Publication status
- Published
File Version
- Accepted version
Journal
Journal of Computational and Applied MathematicsISSN
0377-0427Publisher
ElsevierExternal DOI
Volume
271Page range
247-266Department affiliated with
- Mathematics Publications
Research groups affiliated with
- Numerical Analysis and Scientific Computing Research Group Publications
Full text available
- Yes
Peer reviewed?
- Yes
Legacy Posted Date
2016-02-11First Open Access (FOA) Date
2016-02-11First Compliant Deposit (FCD) Date
2016-02-11Usage metrics
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