A second-order difference scheme for the penalized Black-Scholes equation governing American put option pricing

DOI10.1007/s10614-011-9268-9zbMath1254.91744MaRDI QIDQ1930396

Zhongdi Cen, Aimin Xu, Anbo Le

Publication date: 11 January 2013

Published in: Computational Economics (Search for Journal in Brave)

Full work available at URL: https://doi.org/10.1007/s10614-011-9268-9

zbMATH Keywords

central difference scheme; Black-Scholes equation; piecewise uniform mesh; option valuation; power penalty method

Mathematics Subject Classification ID

91G60: Numerical methods (including Monte Carlo methods)

65M06: Finite difference methods for initial value and initial-boundary value problems involving PDEs

65M12: Stability and convergence of numerical methods for initial value and initial-boundary value problems involving PDEs

91G20: Derivative securities (option pricing, hedging, etc.)

65M15: Error bounds for initial value and initial-boundary value problems involving PDEs