Time-Adaptive High-Order Compact Finite Difference Schemes for Option Pricing in a Family of Stochastic Volatility Models

DOI10.1007/978-3-031-11818-0_49arXiv2107.09094OpenAlexW3185504822MaRDI QIDQ6048675FDOQ6048675

Authors: Bertram Düring, Christof Heuer 

Publication date: 15 September 2023

Published in: Mathematics in Industry (Search for Journal in Brave)

Abstract: We propose a time-adaptive, high-order compact finite difference scheme for option pricing in a family of stochastic volatility models. We employ a semi-discrete high-order compact finite difference method for the spatial discretisation, and combine this with an adaptive time discretisation, extending ideas from [LSRHF02] to fourth-order multistep methods in time.

Full work available at URL: https://arxiv.org/abs/2107.09094

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Mathematics Subject Classification ID

Numerical analysis (65-XX)

Cites Work

• A closed-form solution for options with stochastic volatility with applications to bond and currency options
• Title not available (Why is that?)
• THE GARCH OPTION PRICING MODEL
• High-order compact schemes for parabolic problems with mixed derivatives in multiple space dimensions
• High-order compact finite difference scheme for option pricing in stochastic volatility models
• Smoothing of initial data and rates of convergence for parabolic difference equations
• Implicit solution of hyerbolic equations with space-time adaptivity

Cited In (3)

• High-order compact finite difference scheme for option pricing in stochastic volatility with contemporaneous jump models
• High-order ADI scheme for option pricing in stochastic volatility models
• Space-time adaptive finite difference method for European multi-asset options

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