A computational scheme for uncertain volatility model in option pricing
In this paper we develop a novel numerical scheme for a nonlinear partial differential equation arising from the uncertain volatility model in option pricing. The fitted finite volume method is developed for the space discretization with implicit scheme in time discretization, which results in a non...
| Main Authors: | , |
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| Format: | Journal Article |
| Published: |
Elsevier BV * North-Holland
2009
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| Online Access: | http://hdl.handle.net/20.500.11937/9467 |
| _version_ | 1848745958416842752 |
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| author | Zhang, K. Wang, Song |
| author_facet | Zhang, K. Wang, Song |
| author_sort | Zhang, K. |
| building | Curtin Institutional Repository |
| collection | Online Access |
| description | In this paper we develop a novel numerical scheme for a nonlinear partial differential equation arising from the uncertain volatility model in option pricing. The fitted finite volume method is developed for the space discretization with implicit scheme in time discretization, which results in a nonlinear discrete system. We prove that this method is consistent, stable and monotone, hence it ensures the convergence to the viscosity solution. We also propose an iteration scheme for the nonlinear discrete scheme and show its convergence property. Numerical experiments are implemented to verify the efficiency and usefulness of this method. © 2009 IMACS. |
| first_indexed | 2025-11-14T06:25:38Z |
| format | Journal Article |
| id | curtin-20.500.11937-9467 |
| institution | Curtin University Malaysia |
| institution_category | Local University |
| last_indexed | 2025-11-14T06:25:38Z |
| publishDate | 2009 |
| publisher | Elsevier BV * North-Holland |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | curtin-20.500.11937-94672017-09-13T14:51:29Z A computational scheme for uncertain volatility model in option pricing Zhang, K. Wang, Song In this paper we develop a novel numerical scheme for a nonlinear partial differential equation arising from the uncertain volatility model in option pricing. The fitted finite volume method is developed for the space discretization with implicit scheme in time discretization, which results in a nonlinear discrete system. We prove that this method is consistent, stable and monotone, hence it ensures the convergence to the viscosity solution. We also propose an iteration scheme for the nonlinear discrete scheme and show its convergence property. Numerical experiments are implemented to verify the efficiency and usefulness of this method. © 2009 IMACS. 2009 Journal Article http://hdl.handle.net/20.500.11937/9467 10.1016/j.apnum.2009.01.004 Elsevier BV * North-Holland restricted |
| spellingShingle | Zhang, K. Wang, Song A computational scheme for uncertain volatility model in option pricing |
| title | A computational scheme for uncertain volatility model in option pricing |
| title_full | A computational scheme for uncertain volatility model in option pricing |
| title_fullStr | A computational scheme for uncertain volatility model in option pricing |
| title_full_unstemmed | A computational scheme for uncertain volatility model in option pricing |
| title_short | A computational scheme for uncertain volatility model in option pricing |
| title_sort | computational scheme for uncertain volatility model in option pricing |
| url | http://hdl.handle.net/20.500.11937/9467 |