A family of positive nonstandard numerical methods with application to Black-Scholes equation
Journal: Sahand Communications in Mathematical Analysis (Vol.5, No. 1)Publication Date: 2017-01-01
Authors : Mohammad Mehdizadeh Khalsaraei; Nashmil Osmani;
Page : 31-40
Keywords : Black-Scholes equation; Option pricing; Finite difference scheme; Positivity-preserving;
Abstract
Nonstandard finite difference schemes for the Black-Scholes partial differential equation preserving the positivity property are proposed. Computationally simple schemes are derived by using a nonlocal approximation in the reaction term of the Black-Scholes equation. Unlike the standard methods, the solutions of new proposed schemes are positive and free of the spurious oscillations.
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Last modified: 2017-07-24 14:25:23