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
Author name not available (Why is that?), 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
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 (5)
- High order splitting schemes with complex timesteps and their application in mathematical finance
- A novel numerical scheme for a time fractional Black-Scholes equation
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