Analysis of Quantization Error in Financial Pricing via Finite Difference Methods

DOI10.1137/17M1139655MaRDI QIDQ4572020zbMATH OpenOpenAlexWikidataFDO

Authors Christina C. Christara, Nat Chun-Ho Leung

Publication date 4 July 2018

Published in SIAM Journal on Numerical Analysis (Search for Journal in Brave)

Full work available at URL https://doi.org/10.1137/17m1139655

zbMATH Keywords

numerical solutionoption pricingconvection-diffusion equationsfinite difference methodsFourier analysispartial differential equationBlack-Scholes equationGreeksnonsmooth initial conditions

Mathematics Subject Classification ID

Numerical methods (including Monte Carlo methods) (91G60) Finite difference methods for initial value and initial-boundary value problems involving PDEs (65M06) Numerical methods for partial differential equations, initial value and time-dependent initial-boundary value problems (65M99)

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Cites work

• scientific article; zbMATH DE number 5145313 (Why is no real title available?)
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• Finite difference methods for approximating Heaviside functions
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• Numerical approximations of singular source terms in differential equations
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• Regularization techniques for numerical approximation of PDEs with singularities
• Sharp error estimates for discretizations of the 1D convection–diffusion equation with Dirac initial data
• Shout options: A framework for pricing contracts which can be modified by the investor
• Smoothing of initial data and rates of convergence for parabolic difference equations
• The impact of a natural time change on the convergence of the Crank-Nicolson scheme

Cited in

(4)

• scientific article; zbMATH DE number 5052223 (Why is no real title available?)
• A radial basis function -- Hermite finite difference approach to tackle cash-or-nothing and asset-or-nothing options
• A priori error estimates for reduced order models in finance
• An efficient variable step-size method for options pricing under jump-diffusion models with nonsmooth payoff function

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