A Positivity-Preserving Numerical Scheme for Nonlinear Option Pricing Models
Joint Authors
Zhou, Sheng-Wu
Li, Wei
Wei, Yu
Wen, Cui
Source
Journal of Applied Mathematics
Issue
Vol. 2012, Issue 2012 (31 Dec. 2012), pp.1-20, 20 p.
Publisher
Hindawi Publishing Corporation
Publication Date
2012-12-17
Country of Publication
Egypt
No. of Pages
20
Main Subjects
Abstract EN
A positivity-preserving numerical method for nonlinear Black-Scholes models is developed in this paper.
The numerical method is based on a nonstandard approximation of the second partial derivative.
The scheme is not only unconditionally stable and positive, but also allows us to solve the discrete equation explicitly.
Monotone properties are studied in order to avoid unwanted oscillations of the numerical solution.
The numerical results for European put option and European butterfly spread are compared to the standard finite difference scheme.
It turns out that the proposed scheme is efficient and reliable.
American Psychological Association (APA)
Zhou, Sheng-Wu& Li, Wei& Wei, Yu& Wen, Cui. 2012. A Positivity-Preserving Numerical Scheme for Nonlinear Option Pricing Models. Journal of Applied Mathematics،Vol. 2012, no. 2012, pp.1-20.
https://search.emarefa.net/detail/BIM-1028761
Modern Language Association (MLA)
Zhou, Sheng-Wu…[et al.]. A Positivity-Preserving Numerical Scheme for Nonlinear Option Pricing Models. Journal of Applied Mathematics No. 2012 (2012), pp.1-20.
https://search.emarefa.net/detail/BIM-1028761
American Medical Association (AMA)
Zhou, Sheng-Wu& Li, Wei& Wei, Yu& Wen, Cui. A Positivity-Preserving Numerical Scheme for Nonlinear Option Pricing Models. Journal of Applied Mathematics. 2012. Vol. 2012, no. 2012, pp.1-20.
https://search.emarefa.net/detail/BIM-1028761
Data Type
Journal Articles
Language
English
Notes
Includes bibliographical references
Record ID
BIM-1028761