Displaying similar documents to “Low Volatility Options and Numerical Diffusion of Finite Difference Schemes”

Small-stencil 3D schemes for diffusive flows in porous media

Robert Eymard, Cindy Guichard, Raphaèle Herbin (2012)

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

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In this paper, we study some discretization schemes for diffusive flows in heterogeneous anisotropic porous media. We first introduce the notion of gradient scheme, and show that several existing schemes fall into this framework. Then, we construct two new gradient schemes which have the advantage of a small stencil. Numerical results obtained for real reservoir meshes show the efficiency of the new schemes, compared to existing ones.

Nonstandard Finite Difference Schemes with Application to Finance: Option Pricing

Milev, Mariyan, Tagliani, Aldo (2010)

Serdica Mathematical Journal

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2000 Mathematics Subject Classification: 65M06, 65M12. The paper is devoted to pricing options characterized by discontinuities in the initial conditions of the respective Black-Scholes partial differential equation. Finite difference schemes are examined to highlight how discontinuities can generate numerical drawbacks such as spurious oscillations. We analyze the drawbacks of the Crank-Nicolson scheme that is most frequently used numerical method in Finance because of its...