Displaying similar documents to “Analysis of an uncertain volatility model.”

Consistent stable difference schemes for nonlinear Black-Scholes equations modelling option pricing with transaction costs

Rafael Company, Lucas Jódar, José-Ramón Pintos (2009)

ESAIM: Mathematical Modelling and Numerical Analysis

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This paper deals with the numerical solution of nonlinear Black-Scholes equation modeling European vanilla call option pricing under transaction costs. Using an explicit finite difference scheme consistent with the partial differential equation valuation problem, a sufficient condition for the stability of the solution is given in terms of the stepsize discretization variables and the parameter measuring the transaction costs. This stability condition is linked to some properties of...

Convergence of a high-order compact finite difference scheme for a nonlinear Black–Scholes equation

Bertram Düring, Michel Fournié, Ansgar Jüngel (2004)

ESAIM: Mathematical Modelling and Numerical Analysis - Modélisation Mathématique et Analyse Numérique

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A high-order compact finite difference scheme for a fully nonlinear parabolic differential equation is analyzed. The equation arises in the modeling of option prices in financial markets with transaction costs. It is shown that the finite difference solution converges locally uniformly to the unique viscosity solution of the continuous equation. The proof is based on a careful study of the discretization matrices and on an abstract convergence result due to Barles and Souganides. ...

Calibration and simulation of Heston model

Milan Mrázek, Jan Pospíšil (2017)

Open Mathematics

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We calibrate Heston stochastic volatility model to real market data using several optimization techniques. We compare both global and local optimizers for different weights showing remarkable differences even for data (DAX options) from two consecutive days. We provide a novel calibration procedure that incorporates the usage of approximation formula and outperforms significantly other existing calibration methods. We test and compare several simulation schemes using the parameters obtained...

Low Volatility Options and Numerical Diffusion of Finite Difference Schemes

Milev, Mariyan, Tagliani, Aldo (2010)

Serdica Mathematical Journal

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2000 Mathematics Subject Classification: 65M06, 65M12. In this paper we explore the numerical diffusion introduced by two nonstandard finite difference schemes applied to the Black-Scholes partial differential equation for pricing discontinuous payoff and low volatility options. Discontinuities in the initial conditions require applying nonstandard non-oscillating finite difference schemes such as the exponentially fitted finite difference schemes suggested by D. Duffy and...

DG method for numerical pricing of multi-asset Asian options—the case of options with floating strike

Jiří Hozman, Tomáš Tichý (2017)

Applications of Mathematics

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Option pricing models are an important part of financial markets worldwide. The PDE formulation of these models leads to analytical solutions only under very strong simplifications. For more general models the option price needs to be evaluated by numerical techniques. First, based on an ideal pure diffusion process for two risky asset prices with an additional path-dependent variable for continuous arithmetic average, we present a general form of PDE for pricing of Asian option contracts...

A finite-volume scheme for a kidney nephron model

Aurélie Edwards, Nicolas Seguin, Magali Tournus (2012)

ESAIM: Proceedings

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We present a finite volume type scheme to solve a transport nephron model. The model consists in a system of transport equations with specific boundary conditions. The transport velocity is driven by another equation that can undergo sign changes during the transient regime. This is the main difficulty for the numerical resolution. The scheme we propose is based on an explicit resolution and is stable under a CFL condition which does not depend on the stiffness of source terms. ...