Author:
Koffi Rock Stephane,Tambue Antoine
Abstract
AbstractIn this paper, we introduce a special kind of finite volume method called Multi-Point Flux Approximation method (MPFA) to price European and American options in two dimensional domain. We focus on the L-MPFA method for space discretization of the diffusion term of Black–Scholes operator. The degeneracy of the Black-Scholes operator is tackled using the fitted finite volume method. This combination of fitted finite volume method and L-MPFA method coupled to upwind methods gives us a novel scheme, called the fitted L-MPFA method. Numerical experiments show the accuracy of the novel fitted L-MPFA method comparing to well known schemes for pricing options.
Funder
Robert Bosch Stiftung
Western Norway University Of Applied Sciences
Publisher
Springer Science and Business Media LLC
Subject
Computer Science Applications,Economics, Econometrics and Finance (miscellaneous)
Cited by
1 articles.
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