On an improved computational solution for the 3D HCIR PDE in finance
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Tarih
2019
Dergi Başlığı
Dergi ISSN
Cilt Başlığı
Yayıncı
Ovidius Univ Press
Erişim Hakkı
info:eu-repo/semantics/openAccess
Özet
The aim of this work is to tackle the three-dimensional (3D) Heston-Cox-Ingersoll-Ross (HCIR) time-dependent partial differential equation (PDE) computationally by employing a non-uniform discretization and gathering the finite difference (FD) weighting coefficients into differentiation matrices. In fact, a non-uniform discretization of the 3D computational domain is employed to achieve the second-order of accuracy for all the spatial variables. It is contributed that under what conditions the proposed procedure is stable. This stability bound is novel in literature for solving this model. Several financial experiments are worked out along with computation of the hedging quantities Delta and Gamma.
Açıklama
Anahtar Kelimeler
Financial option pricing, stochastic interest rate, Heston model, non-uniform finite difference method, quadratically convergent
Kaynak
Analele Stiintifice Ale Universitatii Ovidius Constanta-Seria Matematica
WoS Q Değeri
Q2
Scopus Q Değeri
Q3
Cilt
27
Sayı
3
