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Fully Implicit Time-Stepping Schemes for a Parabolic-ODE System of European Options with Liquidity Shocks

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Large-Scale Scientific Computing (LSSC 2015)

Part of the book series: Lecture Notes in Computer Science ((LNISA,volume 9374))

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Abstract

We consider the numerical valuation of European options in a market subject to liquidity shocks. Natural boundary conditions are derived on the truncated boundary. We study the fully implicit scheme for this market model, by use of different algorithms, based on the Newton and the Picard iterations at each time step. To validate the efficiency of the time-stepping and the theoretical results, various appropriate numerical experiments are performed.

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References

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Acknowledgement

This research is supported by the European Union under Grant Agreement number 304617 (FP7 Marie Curie Action Project Multi-ITN STRIKE - Novel Methods in Computational Finance) and Bulgarian National Fund of Science under Project I02/20-2014.

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Authors and Affiliations

  1. Faculty of Natural Science and Education, University of Ruse, 8 Studentska Street, 7017, Rousse, 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. Inst. of Inform. & Communication, Bulgarian Academy of Sciences, Sofia, Bulgaria

    Svetozar D. Margenov

  3. Informatics and Mathematical Modell, Technical University of Denmark, Kongens Lyngby, Denmark

    Jerzy Waśniewski

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Koleva, M.N., Vulkov, L.G. (2015). Fully Implicit Time-Stepping Schemes for a Parabolic-ODE System of European Options with Liquidity Shocks. In: Lirkov, I., Margenov, S., Waśniewski, J. (eds) Large-Scale Scientific Computing. LSSC 2015. Lecture Notes in Computer Science(), vol 9374. Springer, Cham. https://doi.org/10.1007/978-3-319-26520-9_40

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  • DOI: https://doi.org/10.1007/978-3-319-26520-9_40

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  • Publisher Name: Springer, Cham

  • Print ISBN: 978-3-319-26519-3

  • Online ISBN: 978-3-319-26520-9

  • eBook Packages: Computer ScienceComputer Science (R0)

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