Abstract
This paper studies an implicit-explicit (IMEX) finite difference scheme for solving a system of moving boundary partial integro-differential equations (PIDEs) which arises in Asian option pricing under regime-switching jump-diffusion models. First, the moving boundary PIDEs are recast into a fixed boundary problem of the PIDEs. Then the IMEX scheme is proposed to solve the problem and the second-order convergence rates are proved. Numerical examples are carried out to validate the theoretical results.
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Acknowledgements
The author is grateful to the anonymous referees for their valuable comments that have led to a greatly improved paper.
Funding
The work was supported by the Technology and Venture Finance Research Center of Sichuan Key Research Base for Social Sciences (Grant No. KJJR2019-003).
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Chen, Y. Second-order IMEX scheme for a system of partial integro-differential equations from Asian option pricing under regime-switching jump-diffusion models. Numer Algor 89, 1823–1843 (2022). https://doi.org/10.1007/s11075-021-01174-x
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DOI: https://doi.org/10.1007/s11075-021-01174-x
Keywords
- Option pricing
- Asian options
- Regime-switching models
- Jump-diffusion models
- Finite difference methods
- Convergence rates