Publication
Title
Alternating direction implicit finite difference schemes for the Heston-Hull-White partial differential equation
Author
Abstract
In this paper we investigate the effectiveness of alternating direction implicit (ADI) time-discretization schemes in the numerical solution of the three-dimensional HestonHullWhite partial differential equation, which is semidiscretized by applying finite difference schemes on nonuniform spatial grids. We consider the HestonHullWhite model with arbitrary correlation factors, with timedependent mean-reversion levels, with short and long maturities, for cases where the Feller condition is satisfied and for cases where it is not. In addition, both European-style call options and up-and-out call options are considered. It is shown through extensive tests that ADI schemes with a proper choice of parameters perform very well in all situations, in terms of stability, accuracy and efficiency.
Language
English
Source (journal)
The journal of computational finance. - London
Publication
London : 2012
ISSN
1460-1559
Volume/pages
16:1(2012), p. 83-110
ISI
000317664500004
Full text (publisher's version - intranet only)
UAntwerpen
Faculty/Department
Research group
Publication type
Subject
Affiliation
Publications with a UAntwerp address
External links
Web of Science
Record
Identification
Creation 05.09.2012
Last edited 19.09.2017
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