ADI schemes for valuing European options under the Bates model

Hout, Karel J. in ’t; Toivanen, Jari

doi:10.1016/j.apnum.2018.04.003

Final Draft

View/Open

391.1 Kb

Downloads:

Show download details Hide download details

Hout, K. J. I. ’., & Toivanen, J. (2018). ADI schemes for valuing European options under the Bates model. Applied Numerical Mathematics, 130, 143-156. https://doi.org/10.1016/j.apnum.2018.04.003

Published in

Applied Numerical Mathematics

Authors

Hout, Karel J. in ’t |

Toivanen, Jari

Date

2018

Discipline

Tietotekniikka Mathematical Information Technology

Copyright

© Elsevier Ltd, 2018. This is a final draft version of an article whose final and definitive form has been published by Elsevier BV. Published in this repository with the kind permission of the publisher.

This paper is concerned with the adaptation of alternating direction implicit (ADI) time discretization schemes for the numerical solution of partial integro-differential equations (PIDEs) with application to the Bates model in finance. Three different adaptations are formulated and their (von Neumann) stability is analyzed. Ample numerical experiments are provided for the Bates PIDE, illustrating the actual stability and convergence behaviour of the three adaptations.

Publisher

Elsevier BV

ISSN Search the Publication Forum

0168-9274