ADI schemes for valuing European options under the Bates model
Abstract
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.
Main Authors
Format
Articles
Research article
Published
2018
Series
Subjects
Publication in research information system
Publisher
Elsevier BV
The permanent address of the publication
https://urn.fi/URN:NBN:fi:jyu-201804172102Use this for linking
Review status
Peer reviewed
ISSN
0168-9274
DOI
https://doi.org/10.1016/j.apnum.2018.04.003
Language
English
Published in
Applied Numerical Mathematics
Citation
- 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
License
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.