Pricing options under stochastic volatility jump model: a stable adaptive scheme (Q2273036)

The article is a natural continuation of studies related to the important topic - option pricing under the stochastic volatility models with jumps (SVJ). The authors show the quadratic convergence rate for the discussed derivative approximations on the introduced non uniform networks. The constructed scheme under some conditions for solving the financial model via the semi-discretized systems of ODEs is conditionally time-stable (see Theorem 6.1). The consistency of the computational scheme is established while sufficient condition for convergence and consistency in approximating of the integral term is also given. Computational results for various options show the superiority and efficiency of authors approach. Numerical examples using computer algebraic system Mathematica, illustrating the authors results are given. The studies are of interest to experts in the field of financial mathematics.