Title
Positive numerical splitting method for the hull and white 2D black-scholes equation Positive numerical splitting method for the hull and white 2D black-scholes equation
Author
Faculty/Department
Faculty of Sciences. Mathematics and Computer Science
Publication type
article
Publication
New York, N.Y. ,
Subject
Mathematics
Source (journal)
Numerical methods for partial differential equations. - New York, N.Y.
Volume/pages
31(2015) :3 , p. 822-846
ISSN
0749-159X
ISI
000351777700011
Carrier
E
Target language
English (eng)
Full text (Publishers DOI)
Affiliation
University of Antwerp
Abstract
We consider the locally one-dimensional backward Euler splitting method to solve numerically the Hull and White problem for pricing European options with stochastic volatility in the presence of a mixed derivative term. We prove the first-order convergence of the time-splitting. The parabolic equation degenerates on the boundary x=0 and we apply a fitted finite volume scheme to the equation to resolve the degeneracy and derive the fully discrete problem as we also investigate the discrete maximum principle. Numerical experiments illustrate the efficiency of our difference scheme. (c) 2014 Wiley Periodicals, Inc. Numer Methods Partial Differential Eq 31: 822-846, 2015
E-info
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https://repository.uantwerpen.be/docman/iruaauth/92fd0f/27c125499.pdf
Handle