Stochastic partial differential equation

In this study, we investigated one of the most popular stochastic volatility pricing models, the Heston model, for European options. This paper deals with the implementation of a finite difference scheme to solve a two-dimensional partial differential equation form of the Heston model.

14p vibecca 01-10-2024 4 1   Download

In this paper, finite difference schemes are proposed to approximate solutions of stochastic advection-diffusion equations. We used central-difference formula of third-order to approximate spatial derivatives. The stability, consistency and convergence of the scheme are analysed and established. A numerical result is also given to demonstrate the computational efficiency of the stochastic schemes.

9p tieuthi3006 16-03-2018 55 1   Download