High-order compact finite difference scheme for option pricing in stochastic volatility with contemporaneous jump models

Düring, Bertram and Pitkin, Alexander (2019) High-order compact finite difference scheme for option pricing in stochastic volatility with contemporaneous jump models. In: Progress in Industrial Mathematics at ECMI 2018. The European Consortium for Mathematics in Industry . Springer Verlag. (Accepted)

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Abstract

We extend the scheme developed in B. Düring, A. We extend the scheme developed in B. Düring, A. Pitkin, "High-order compact finite difference scheme for option pricing in stochastic volatility jump models", 2019, to the so-called stochastic volatility with contemporaneous jumps (SVCJ) model, derived by Duffie, Pan and Singleton. The performance of the scheme is assessed through a number of numerical experiments, using comparisons against a standard second-order central difference scheme. We observe that the new high-order compact scheme achieves fourth order convergence and discuss the effects on efficiency and computation time.

Item Type: Book Section
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
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Depositing User: Alice Jackson
Date Deposited: 11 Mar 2019 10:14
Last Modified: 11 Mar 2019 10:14
URI: http://sro.sussex.ac.uk/id/eprint/82416

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Project NameSussex Project NumberFunderFunder Ref
Novel discretisations of higher-order nonlinear PDEG1603LEVERHULME TRUSTRPG-2015-069
EPSRC Doctoral Training Partnership (DTP)UnsetUnsetEP/M506667/1