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Numerical solution of linear and nonlinear Black–Scholes option pricing equations

✍ Scribed by Rafael Company; Enrique Navarro; José Ramón Pintos; Enrique Ponsoda

Publisher
Elsevier Science
Year
2008
Tongue
English
Weight
375 KB
Volume
56
Category
Article
ISSN
0898-1221

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✦ Synopsis

This paper deals with the numerical solution of Black-Scholes option pricing partial differential equations by means of semidiscretization technique. For the linear case a fourth-order discretization with respect to the underlying asset variable allows a highly accurate approximation of the solution. For the nonlinear case of interest modeling option pricing with transaction costs, semidiscretization technique provides a competitive numerical solution with respect to others recently given in [B. Düring, M. Fournier, A. Jüngel, Convergence of a high order compact finite difference scheme for a nonlinear Black-Scholes equation,

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