A second-order difference scheme for the penalized Black-Scholes equation governing American put option pricing

DOI10.1007/s10614-011-9268-9zbMath1254.91744OpenAlexW1995718228MaRDI QIDQ1930396

Zhongdi Cen, Aimin Xu, Anbo Le

Publication date: 11 January 2013

Published in: Computational Economics (Search for Journal in Brave)

Full work available at URL: https://doi.org/10.1007/s10614-011-9268-9

zbMATH Keywords

central difference schemeBlack-Scholes equationpiecewise uniform meshoption valuationpower penalty method

Mathematics Subject Classification ID

Numerical methods (including Monte Carlo methods) (91G60) 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) Derivative securities (option pricing, hedging, etc.) (91G20) Error bounds for initial value and initial-boundary value problems involving PDEs (65M15)

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