An exploration of a balanced up-downwind scheme for solving Heston volatility model equations on variable grids (Q2632499)
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| Language | Label | Description | Also known as |
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| English | An exploration of a balanced up-downwind scheme for solving Heston volatility model equations on variable grids |
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An exploration of a balanced up-downwind scheme for solving Heston volatility model equations on variable grids (English)
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14 May 2019
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Summary: This paper studies an effective finite difference scheme for solving two-dimensional Heston stochastic volatility option-pricing model problems. A dynamically balanced up-downwind strategy for approximating the cross-derivative is implemented and analyzed. Semi-discretized and spatially nonuniform platforms are utilized. The numerical method comprised is simple and straightforward, with reliable first order overall approximations. The spectral norm is used throughout the investigation, and numerical stability is proven. Simulation experiments are given to illustrate our results.
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Heston volatility model
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initial-boundary value problems
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finite difference approximations
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up-downwind scheme
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order of convergence
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stability
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