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

Düring, Bertram and Pitkin, Alexander (2018) Efficient hedging in Bates model using high-order compact finite differences. The 5th AMMCS International Conference, Waterloo, Ontario, Canada, August 18-23, 2019. Published in: Makarov, Roman, (ed.) Recent Advances in Mathematical and Statistical Methods for Scientific and Engineering Applications. 259 489-498. Springer Verlag ISSN 2194-1009

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Abstract

We evaluate the hedging performance of the scheme developed in B. Düring, A. Pitkin, ”High-order compact finite difference scheme for option pricing in stochastic volatility jump models”, 2017. We compare the scheme’s hedging performance to standard finite difference methods in different examples. We observe that the new scheme achieves fourth-order convergence, outperforming a standard, second-order central finite difference approximation in all our experiments.

Item Type: Conference Proceedings
Schools and Departments: School of Mathematical and Physical Sciences > Mathematics
Research Centres and Groups: Numerical Analysis and Scientific Computing Research Group
Subjects: Q Science > QA Mathematics
Depositing User: Billy Wichaidit
Date Deposited: 30 Apr 2018 13:29
Last Modified: 07 Nov 2018 16:02
URI: http://sro.sussex.ac.uk/id/eprint/75216

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Project NameSussex Project NumberFunderFunder Ref
Novel discretisations of higher-order nonlinear PDEG1603LEVERHULME TRUSTRPG-2015-069
EPSRC Doctoral Training Partnership 2016-17G1950EPSRC-ENGINEERING & PHYSICAL SCIENCES RESEARCH COUNCILEP/N509784/1