Sun, C.; Sheng, Q. An Exploration of a Balanced Up-Downwind Scheme for Solving Heston Volatility Model Equations on Variable Grids. Algorithms2019, 12, 30.
Sun, C.; Sheng, Q. An Exploration of a Balanced Up-Downwind Scheme for Solving Heston Volatility Model Equations on Variable Grids. Algorithms 2019, 12, 30.
Sun, C.; Sheng, Q. An Exploration of a Balanced Up-Downwind Scheme for Solving Heston Volatility Model Equations on Variable Grids. Algorithms2019, 12, 30.
Sun, C.; Sheng, Q. An Exploration of a Balanced Up-Downwind Scheme for Solving Heston Volatility Model Equations on Variable Grids. Algorithms 2019, 12, 30.
Abstract
This paper studies an effective finite difference scheme for solving two-dimensional Heston stochastic volatility option pricing model problems. A dynamically balanced up-downwind strategy for approximating the cross-derivative is implemented and analyzed. Semi-discretized and spatially nonuniform platforms are utilized. The numerical method comprised is simple, straightforward with reliable first order overall approximations. The spectral norm is used throughout the investigation and numerical stability is proven. Simulation experiments are given to illustrate our results.
Keywords
Heston volatility model; initial-boundary value problems; finite difference approximations; up-downwind scheme; order of convergence; stability
Subject
Computer Science and Mathematics, Computational Mathematics
Copyright:
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
