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Fourth-order compact schemes for a parabolic-ordinary system of European option pricing liquidity shocks model

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Abstract

This paper provides a numerical investigation for European options under parabolic-ordinary system modeling markets to liquidity shocks. Our main results concern construction and analysis of fourth order in space compact finite difference schemes (CFDS). Numerical experiments using Richardson extrapolation in time are discussed.

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Authors and Affiliations

  1. Department of Mathematics, Ruse University, 7017, Ruse, Bulgaria

    Miglena N. Koleva

  2. Department of Applied Mathematics and Statistics, Ruse University, 7017, Ruse, Bulgaria

    Walter Mudzimbabwe & Lubin G. Vulkov

Authors
  1. Miglena N. Koleva
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  2. Walter Mudzimbabwe
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  3. Lubin G. Vulkov
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Correspondence to Miglena N. Koleva.

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Koleva, M.N., Mudzimbabwe, W. & Vulkov, L.G. Fourth-order compact schemes for a parabolic-ordinary system of European option pricing liquidity shocks model. Numer Algor 74, 59–75 (2017). https://doi.org/10.1007/s11075-016-0138-3

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  • DOI: https://doi.org/10.1007/s11075-016-0138-3

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