Cubic spline method for a generalized Black-Scholes equation (Q1718497)

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Cubic spline method for a generalized Black-Scholes equation
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    Cubic spline method for a generalized Black-Scholes equation (English)
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    8 February 2019
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    Summary: We develop a numerical method based on cubic polynomial spline approximations to solve a a generalized Black-Scholes equation. We apply the implicit Euler method for the time discretization and a cubic polynomial spline method for the spatial discretization. We show that the matrix associated with the discrete operator is an M-matrix, which ensures that the scheme is maximum-norm stable. It is proved that the scheme is second-order convergent with respect to the spatial variable. Numerical examples demonstrate the stability, convergence, and robustness of the scheme.
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