Proceedings of the 2014 International Conference on Management, Education and Social Science

A Second Order Asymmetric Finite Difference Method for the Black-Scholes Equation of European Options

Authors
Wenbin Feng, Philsu Kim, Xiangfan Piao
Corresponding Author
Wenbin Feng
Available Online January 2014.
DOI
https://doi.org/10.2991/icmess-14.2014.20How to use a DOI?
Keywords
Black-Scholes equation, European option pricing, asymmetric scheme, stability analysis, numerical example
Abstract
In this paper, we develop a fast numerical scheme for computing the European option pricing problems governed by the Black-Scholes equation. We prove that the proposed scheme has second order accuracy in both time and space. Under some restrictions, the stability of the proposed method in the sense of Von Neumann analysis is presented. It is shown that the proposed scheme has a good performance in the sense of the computational cost compare to the Crank-Nicolson scheme. Also the accuracy of the proposed scheme is better than the semi-implicit scheme in most cases.
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Proceedings
2014 International Conference on Management, Education and Social Science (ICMESS 2014)
Part of series
Advances in Intelligent Systems Research
Publication Date
January 2014
ISBN
978-90786-77-98-7
ISSN
1951-6851
DOI
https://doi.org/10.2991/icmess-14.2014.20How to use a DOI?
Open Access
This is an open access article distributed under the CC BY-NC license.

Cite this article

TY  - CONF
AU  - Wenbin Feng
AU  - Philsu Kim
AU  - Xiangfan Piao
PY  - 2014/01
DA  - 2014/01
TI  - A Second Order Asymmetric Finite Difference Method for the Black-Scholes Equation of European Options
BT  - 2014 International Conference on Management, Education and Social Science (ICMESS 2014)
PB  - Atlantis Press
SN  - 1951-6851
UR  - https://doi.org/10.2991/icmess-14.2014.20
DO  - https://doi.org/10.2991/icmess-14.2014.20
ID  - Feng2014/01
ER  -