Fitted finite volume method for a generalized Black-Scholes equation transformed on finite interval (Q393762): Difference between revisions
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The author considers the classical and generalized Black-Scholes equations transforming the infinite (spatial) interval to a \([0,1]\) and writes the boundary-initial problem in variational form. For the continuity and Gårding coercivity he refers to own earlier work. The main body of the paper describes the finite volume method which essentially follows the Scharfetter-Gummel (i.e. L-spline) approach if not counting the boundary elements where no boundary condition can be prescribed due to the degeneracy. Here the author wins an additional degree of freedom by choosing a constant right hand side in the local problems. Next, the equations are fully discretized using the \(\theta\)- (or weighted difference) method. It is proved that the system matrix is an \(M\)-matrix for sufficiently small time step (independently of \(\theta\)). The numerical experiments (using Crank-Nicolson) mostly show first-order convergence. The question of small damped oscillations in the case of a discontinuous initial function is also discussed. | |||
Property / review text: The author considers the classical and generalized Black-Scholes equations transforming the infinite (spatial) interval to a \([0,1]\) and writes the boundary-initial problem in variational form. For the continuity and Gårding coercivity he refers to own earlier work. The main body of the paper describes the finite volume method which essentially follows the Scharfetter-Gummel (i.e. L-spline) approach if not counting the boundary elements where no boundary condition can be prescribed due to the degeneracy. Here the author wins an additional degree of freedom by choosing a constant right hand side in the local problems. Next, the equations are fully discretized using the \(\theta\)- (or weighted difference) method. It is proved that the system matrix is an \(M\)-matrix for sufficiently small time step (independently of \(\theta\)). The numerical experiments (using Crank-Nicolson) mostly show first-order convergence. The question of small damped oscillations in the case of a discontinuous initial function is also discussed. / rank | |||
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Property / reviewed by: Gisbert Stoyan / rank | |||
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Property / Mathematics Subject Classification ID | |||
Property / Mathematics Subject Classification ID: 65M08 / rank | |||
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Property / Mathematics Subject Classification ID: 35K65 / rank | |||
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Property / Mathematics Subject Classification ID | |||
Property / Mathematics Subject Classification ID: 91G60 / rank | |||
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Property / Mathematics Subject Classification ID | |||
Property / Mathematics Subject Classification ID: 65M12 / rank | |||
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Property / zbMATH DE Number: 6249862 / rank | |||
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Property / zbMATH Keywords | |||
generalized Black-Scholes equation | |||
Property / zbMATH Keywords: generalized Black-Scholes equation / rank | |||
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degenerate parabolic equation | |||
Property / zbMATH Keywords: degenerate parabolic equation / rank | |||
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fitted finite volume method | |||
Property / zbMATH Keywords: fitted finite volume method / rank | |||
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Gårding coercivity | |||
Property / zbMATH Keywords: Gårding coercivity / rank | |||
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positivity | |||
Property / zbMATH Keywords: positivity / rank | |||
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theta method | |||
Property / zbMATH Keywords: theta method / rank | |||
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Scharfetter-Gummel | |||
Property / zbMATH Keywords: Scharfetter-Gummel / rank | |||
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L-spline | |||
Property / zbMATH Keywords: L-spline / rank | |||
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weighted difference | |||
Property / zbMATH Keywords: weighted difference / rank | |||
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numerical experiments | |||
Property / zbMATH Keywords: numerical experiments / rank | |||
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Crank-Nicolson | |||
Property / zbMATH Keywords: Crank-Nicolson / rank | |||
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convergence | |||
Property / zbMATH Keywords: convergence / rank | |||
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Revision as of 15:46, 29 June 2023
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English | Fitted finite volume method for a generalized Black-Scholes equation transformed on finite interval |
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Fitted finite volume method for a generalized Black-Scholes equation transformed on finite interval (English)
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24 January 2014
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The author considers the classical and generalized Black-Scholes equations transforming the infinite (spatial) interval to a \([0,1]\) and writes the boundary-initial problem in variational form. For the continuity and Gårding coercivity he refers to own earlier work. The main body of the paper describes the finite volume method which essentially follows the Scharfetter-Gummel (i.e. L-spline) approach if not counting the boundary elements where no boundary condition can be prescribed due to the degeneracy. Here the author wins an additional degree of freedom by choosing a constant right hand side in the local problems. Next, the equations are fully discretized using the \(\theta\)- (or weighted difference) method. It is proved that the system matrix is an \(M\)-matrix for sufficiently small time step (independently of \(\theta\)). The numerical experiments (using Crank-Nicolson) mostly show first-order convergence. The question of small damped oscillations in the case of a discontinuous initial function is also discussed.
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generalized Black-Scholes equation
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degenerate parabolic equation
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fitted finite volume method
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Gårding coercivity
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positivity
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theta method
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Scharfetter-Gummel
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L-spline
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weighted difference
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numerical experiments
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Crank-Nicolson
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convergence
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