An exploration of a balanced up-downwind scheme for solving Heston volatility model equations on variable grids

DOI10.3390/A12020030MaRDI QIDQ2632499zbMATH OpenOpenAlexWikidataFDO

Authors Chong Sun, Qin Sheng

Publication date 14 May 2019

Published in Algorithms (Search for Journal in Brave)

Copyright license Creative Commons Attribution 4.0 International

Full work available at URL https://doi.org/10.3390/a12020030

zbMATH Keywords

stabilityorder of convergenceinitial-boundary value problemsfinite difference approximationsHeston volatility modelup-downwind scheme

Mathematics Subject Classification ID

Derivative securities (option pricing, hedging, etc.) (91G20) Numerical methods (including Monte Carlo methods) (91G60) Applications of difference equations (39A60) Finite difference methods for initial value and initial-boundary value problems involving PDEs (65M06) Stability and convergence of numerical methods for initial value and initial-boundary value problems involving PDEs (65M12)

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Cites work

• A First Course in the Numerical Analysis of Differential Equations
• A closed-form solution for options with stochastic volatility with applications to bond and currency options
• A predictor-corrector scheme based on the ADI method for pricing american puts with stochastic volatility
• An unconditionally monotone numerical scheme for the two-factor uncertain volatility model
• Classroom Note:Calculation of Weights in Finite Difference Formulas
• Efficient numerical methods for pricing American options under stochastic volatility
• Full and fast calibration of the Heston stochastic volatility model
• High-order ADI schemes for diffusion equations with mixed derivatives in the combination technique
• High-order compact finite difference scheme for option pricing in stochastic volatility models
• High-order compact finite difference schemes for option pricing in stochastic volatility models on non-uniform grids
• Numerical solution of degenerate stochastic Kawarada equations via a semi-discretized approach
• On Asian option pricing for NIG Lévy processes
• Preconditioned iterative methods for fractional diffusion models in finance
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• Stability of ADI schemes applied to convection--diffusion equations with mixed derivative terms
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• Survey of the stability of linear finite difference equations
• The Heston model and its extensions in Matlab and C\#. With a foreword by Steven L. Heston
• The pricing of options and corporate liabilities

Cited in

(6)

• A note on the numerical resolution of Heston PDEs
• Stability of central finite difference schemes for the Heston PDE
• Diamond-cell finite volume scheme for the Heston model
• A robust upwind difference scheme for pricing perpetual American put options under stochastic volatility
• A note on stochastic polynomial chaos expansions for uncertain volatility and Asian option pricing
• Removing the correlation term in option pricing Heston model: numerical analysis and computing

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