Volume 19, Number 7 (IJES (Chemical) 2009)                   IJIEPM 2009, 19(7): 87-93 | Back to browse issues page


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Zamani S, Zargari B. A FINITE DIFFERENCE SCHEME TO CALCULATE THE OPTION PRICES IN STOCHASTIC VOLATILITY MODELS. IJIEPM. 2009; 19 (7) :87-93
URL: http://ijiepm.iust.ac.ir/article-1-280-en.html

Abstract:   (6048 Views)
In stochastic volatility models, European option prices are solutions to parabolic differential equations. In this paper we propose a finite difference scheme for solving these equations numerically. We prove the stability and convergence of this method in norm infinity. Then we use the ADL method to separate the operators, this allows us to apply Thomas algorithm to solve the corresponding linear systems in each step
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