Removing the correlation term in option pricing Heston model: numerical analysis and computing
type: Item
instance of: scholarly article
title: Removing the correlation term in option pricing Heston model: numerical analysis and computing
zbMATH Open document ID: 1293.91188
DOI: 10.1155/2013/246724
author: M. Fakharany
author: M.-C. Casabán
author: R. Company
author: L. Jódar
published in: Abstract and Applied Analysis
publication date: 2014-06-23T00:00:00Z
review text: Summary: This paper deals with the numerical solution of option pricing stochastic volatility model described by a time-dependent, two-dimensional convection-diffusion reaction equation. Firstly, the mixed spatial derivative of the partial differential equation (PDE) is removed by means of the classical technique for reduction of second-order linear partial differential equations to canonical form. An explicit difference scheme with positive coefficients and only five-point computational stencil is constructed. The boundary conditions are adapted to the boundaries of the rhomboid transformed numerical domain. Consistency of the scheme with the PDE is shown and stepsize discretization conditions in order to guarantee stability are established. Illustrative numerical examples are included.
Mathematics Subject Classification ID: 91G60
Mathematics Subject Classification ID: 65M06
Mathematics Subject Classification ID: 91G20
zbMATH DE Number: 6306559
Wikidata QID: Q58915655
MaRDI profile type: Publication
full work available at URL: https://doi.org/10.1155/2013/246724
OpenAlex ID: W2056904743
cites work: A Closed-Form Solution for Options with Stochastic Volatility with Applications to Bond and Currency Options
cites work: PDE and martingale methods in option pricing.
cites work: Time Dependent Heston Model
cites work: A spectral element approximation to price European options with one asset and stochastic volatility
cites work: Multigrid for American option pricing with stochastic volatility
cites work: High-order compact finite difference scheme for option pricing in stochastic volatility models
cites work: Q3433874
cites work: ADI finite difference schemes for option pricing in the Heston model with correlation
cites work: Q5689624
cites work: Consistent stable difference schemes for nonlinear Black-Scholes equations modelling option pricing with transaction costs
cites work: Numerical analysis and computing for option pricing models in illiquid markets
cites work: Numerical analysis and computing of a non-arbitrage liquidity model with observable parameters for derivatives
cites work: Q4223567
cites work: Far field boundary conditions for Black-Scholes equations
cites work: A FAST, STABLE AND ACCURATE NUMERICAL METHOD FOR THE BLACK–SCHOLES EQUATION OF AMERICAN OPTIONS
cites work: Q3696432
description: scientific article; zbMATH DE number 6306559