Stability of central finite difference schemes for the Heston PDE (Q415346): Difference between revisions

The authors establish some rigorous stability bounds for the central second-order finite difference discretization of the Heston equation arising in mathematical finance. The method employed by the authors makes use of logarithmic spectral norm. The advection and diffusion part in the Heston equation are analyzed separately and the approach is valid for arbitrary Heston parameters. Various numerical experiments are presented to support the theoretical findings.

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reviewed by

Marius Ghergu

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zbMATH Keywords

Heston equation

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finite difference scheme

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logarithmic norm

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stability

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advection-diffusion equation

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mathematical finance

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numerical experiments

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MaRDI profile type

MaRDI publication profile

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cites work

Introduction to large truncated Toeplitz matrices

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Numerical Methods for Ordinary Differential Equations

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Solving Ordinary Differential Equations I

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Q4531870

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A Closed-Form Solution for Options with Stochastic Volatility with Applications to Bond and Currency Options

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Stability of central finite difference schemes on non-uniform grids for the Black-Scholes equation

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Q4421310

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Q2763689

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Stochastic calculus for finance. II: Continuous-time models.

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Q5694789

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Identifiers

zbMATH Open document ID

1245.65118

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DOI

10.1007/s11075-011-9514-1

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Mathematics Subject Classification ID

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Sitelinks

Mathematics(1 entry)

mardi Publication:415346

@@ Property / review text @@
+The authors establish some rigorous stability bounds for the central second-order finite difference discretization of the Heston equation arising in mathematical finance. The method employed by the authors makes use of logarithmic spectral norm. The advection and diffusion part in the Heston equation are analyzed separately and the approach is valid for arbitrary Heston parameters. Various numerical experiments are presented to support the theoretical findings.
+Normal rank
@@ Property / reviewed by @@
+Marius Ghergu
@@ Property / reviewed by: Marius Ghergu / rank @@
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+M12
@@ Property / Mathematics Subject Classification ID: 65M12 / rank @@
+Normal rank
@@ Property / Mathematics Subject Classification ID @@
+M06
@@ Property / Mathematics Subject Classification ID: 65M06 / rank @@
+Normal rank
@@ Property / Mathematics Subject Classification ID @@
+K20
@@ Property / Mathematics Subject Classification ID: 35K20 / rank @@
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@@ Property / Mathematics Subject Classification ID @@
+G60
@@ Property / Mathematics Subject Classification ID: 91G60 / rank @@
+Normal rank
@@ Property / zbMATH DE Number @@
+6031714
@@ Property / zbMATH DE Number: 6031714 / rank @@
+Normal rank
@@ Property / zbMATH Keywords @@
+Heston equation
@@ Property / zbMATH Keywords: Heston equation / rank @@
+Normal rank
@@ Property / zbMATH Keywords @@
+finite difference scheme
@@ Property / zbMATH Keywords: finite difference scheme / rank @@
+Normal rank
@@ Property / zbMATH Keywords @@
+logarithmic norm
@@ Property / zbMATH Keywords: logarithmic norm / rank @@
+Normal rank
@@ Property / zbMATH Keywords @@
+stability
@@ Property / zbMATH Keywords: stability / rank @@
+Normal rank
@@ Property / zbMATH Keywords @@
+advection-diffusion equation
@@ Property / zbMATH Keywords: advection-diffusion equation / rank @@
+Normal rank
@@ Property / zbMATH Keywords @@
+mathematical finance
@@ Property / zbMATH Keywords: mathematical finance / rank @@
+Normal rank
@@ Property / zbMATH Keywords @@
+numerical experiments
@@ Property / zbMATH Keywords: numerical experiments / rank @@
+Normal rank
@@ Property / MaRDI profile type @@
+MaRDI publication profile
@@ Property / MaRDI profile type: MaRDI publication profile / rank @@
+Normal rank
@@ Property / OpenAlex ID @@
+W2092640538
@@ Property / OpenAlex ID: W2092640538 / rank @@
+Normal rank
@@ Property / arXiv ID @@
+.6532
@@ Property / arXiv ID: 1011.6532 / rank @@
+Normal rank
@@ Property / cites work @@
+Introduction to large truncated Toeplitz matrices
@@ Property / cites work: Introduction to large truncated Toeplitz matrices / rank @@
+Normal rank
@@ Property / cites work @@
+Numerical Methods for Ordinary Differential Equations
+Normal rank
@@ Property / cites work @@
+Solving Ordinary Differential Equations I
@@ Property / cites work: Solving Ordinary Differential Equations I / rank @@
+Normal rank
@@ Property / cites work @@
+Q4531870
@@ Property / cites work: Q4531870 / rank @@
+Normal rank
@@ Property / cites work @@
+A Closed-Form Solution for Options with Stochastic Volatility with Applications to Bond and Currency Options
+Normal rank
@@ Property / cites work @@
+Stability of central finite difference schemes on non-uniform grids for the Black-Scholes equation
+Normal rank
@@ Property / cites work @@
+Q4421310
@@ Property / cites work: Q4421310 / rank @@
+Normal rank
@@ Property / cites work @@
+Q2763689
@@ Property / cites work: Q2763689 / rank @@
+Normal rank
@@ Property / cites work @@
+Stochastic calculus for finance. II: Continuous-time models.
+Normal rank
@@ Property / cites work @@
+Q5694789
@@ Property / cites work: Q5694789 / rank @@
+Normal rank
@@ links / mardi / name / links / mardi / name @@
+Publication:415346