An Efficient Method for Solving Spread Option Pricing Problem: Numerical Analysis and Computing

Abstract EN

This paper deals with numerical analysis and computing of spread option pricing problem described by a two-spatial variables partial differential equation.

Both European and American cases are treated.

Taking advantage of a cross derivative removing technique, an explicit difference scheme is developed retaining the benefits of the one-dimensional finite difference method, preserving positivity, accuracy, and computational time efficiency.

Numerical results illustrate the interest of the approach.