A high‐order and fast scheme with variable time steps for the time‐fractional Black‐Scholes equation
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Publication:6142000
DOI10.1002/MMA.8623arXiv2109.02028OpenAlexW4290547600MaRDI QIDQ6142000FDOQ6142000
Authors: Pin Lyu 
Publication date: 21 December 2023
Published in: Mathematical Methods in the Applied Sciences (Search for Journal in Brave)
Abstract: In this paper, a high-order and fast numerical method is investigated for the time-fractional Black-Scholes equation. In order to deal with the typical weak initial singularities of the solution, we construct a finite difference scheme with variable time steps, where the fractional derivative is approximated by the nonuniform Alikhanov formula and the sum-of-exponentials (SOE) technique. In the spatial direction, an average approximation with fourth-order accuracy is employed. The stability and the convergence with second-order in time and fourth-order in space of the proposed scheme are religiously derived by the energy method. Numerical examples are given to demonstrate the theoretical statement.
Full work available at URL: https://arxiv.org/abs/2109.02028
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Fractional partial differential equations (35R11) 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) Computational methods for problems pertaining to game theory, economics, and finance (91-08)
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Cited In (7)
- High order splitting schemes with complex timesteps and their application in mathematical finance
- A novel numerical scheme for a time fractional Black-Scholes equation
- A fast compact difference scheme with unequal time-steps for the tempered time-fractional Black–Scholes model
- Two high-order compact difference schemes with temporal graded meshes for time-fractional Black-Scholes equation
- Fast numerical scheme for the time-fractional option pricing model with asset-price-dependent variable order
- Temporal Second-Order Fast Finite Difference/Compact Difference Schemes for Time-Fractional Generalized Burgers’ Equations
- Long time \(H^1\)-stability of fast \(\mathrm{L}2\)-\(1_\sigma\) method on general nonuniform meshes for subdiffusion equations
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