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

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scientific article; zbMATH DE number 6387219
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    Computable error estimates of a finite difference scheme for option pricing in exponential Lévy models
    scientific article; zbMATH DE number 6387219

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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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