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High-order compact finite difference schemes for a nonlinear Black-Scholes equation
journal contribution
posted on 2023-06-08, 08:38 authored by Bertram Duering, Michel Fournié, Ansgar JüngelA nonlinear Black-Scholes equation which models transaction costs arising in the hedging of portfolios is discretized semi-implicitly using high order compact finite difference schemes. A new compact scheme, generalizing the compact schemes of Rigal [29], is derived and proved to be unconditionally stable and non-oscillatory. The numerical results are compared to standard finite difference schemes. It turns out that the compact schemes have very satisfying stability and non-oscillatory properties and are generally more efficient than the considered classical schemes.
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Publication status
- Published
Journal
International Journal of Theoretical and Applied FinanceISSN
0219-0249Publisher
World Scientific PublishingExternal DOI
Issue
7Volume
6Page range
767-789Department affiliated with
- Mathematics Publications
Full text available
- No
Peer reviewed?
- Yes
Legacy Posted Date
2012-02-06Usage metrics
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