Computable error estimates of a finite difference scheme for option pricing in exponential Lévy models (Q486710): Difference between revisions

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Revision as of 19:30, 19 March 2024

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Computable error estimates of a finite difference scheme for option pricing in exponential Lévy models
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    Computable error estimates of a finite difference scheme for option pricing in exponential Lévy models (English)
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    16 January 2015
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    The exponential Lévy process is used to model the option pricing. This model presents an integro-differential equation of the form \[ f'_{t}(t,x)= \mathcal{L} f(t,x),\qquad(t,x)\in (0,T]\times \mathbb R, \] \[ f(0,x)=g(x), \] where the operator \( \mathcal{L} \) has the specific form of the integro-differential operator. The authors are interested in the weak solution of this problem and its approximation by the finite differences schemes. An implicit-explicit algorithm by the time-stepping variable is given. The staying part of the article concerns the order of the error approximation by space variable.
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    finite differences method
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    diffusion approximation
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    error estimate
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    Lévy process
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    infinite activity
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    parabolic integro-differential equation
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    jump-diffusion models
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    option pricing
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