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Valuation of European Options with Liquidity Shocks Switching by Fitted Finite Volume Method

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Large-Scale Scientific Computing (LSSC 2019)

Part of the book series: Lecture Notes in Computer Science ((LNTCS,volume 11958))

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Abstract

In the present paper, we construct a superconvergent fitted finite volume method (FFVM) for pricing European option with switching liquidity shocks. We investigate some basic properties of the numerical solution and establish superconvergence in maximal discrete norm. An efficient algorithm, governing the degeneracy and exponential non-linearity in the problem, is proposed. Results from various numerical experiments with different European options are provided.

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Acknowledgments

This research is supported by the Bulgarian National Science Fund under Project DN 12/4 from 2017.

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Authors and Affiliations

  1. University of Ruse, 8 Studentska str., 7017, Ruse, Bulgaria

    Miglena N. Koleva & Lubin G. Vulkov

Authors
  1. Miglena N. Koleva
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  2. Lubin G. Vulkov
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Corresponding author

Correspondence to Miglena N. Koleva .

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Editors and Affiliations

  1. Bulgarian Academy of Sciences, Sofia, Bulgaria

    Ivan Lirkov

  2. Bulgarian Academy of Sciences, Sofia, Bulgaria

    Svetozar Margenov

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Koleva, M.N., Vulkov, L.G. (2020). Valuation of European Options with Liquidity Shocks Switching by Fitted Finite Volume Method. In: Lirkov, I., Margenov, S. (eds) Large-Scale Scientific Computing. LSSC 2019. Lecture Notes in Computer Science(), vol 11958. Springer, Cham. https://doi.org/10.1007/978-3-030-41032-2_67

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  • DOI: https://doi.org/10.1007/978-3-030-41032-2_67

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  • Publisher Name: Springer, Cham

  • Print ISBN: 978-3-030-41031-5

  • Online ISBN: 978-3-030-41032-2

  • eBook Packages: Computer ScienceComputer Science (R0)

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