Izvorni znanstveni članak

https://doi.org/10.64785/mc.30.2.4

An efficient robust computational method for solving Black-Scholes PDEs

Saurabh Bansal orcid.org/0000-0002-7798-3290 ; Department of Mathematics, Indian Institute of Technology Guwahati, Guwahati , India *
Natesan Srinivasan

* Dopisni autor.

Sažetak

In this article, we propose a computational method for the numerical solution of Black-Scholes PDEs arising in option pricing. First, we discretize the time-domain by uniform mesh and apply the Crank-Nicolson method to approximate the time variable. Then, we use the streamline-diffusion finite element method (SDFEM) for the spatial derivative on different nonuniform meshes. The proposed method is of second-order convergent in both variables. For comparison purposes, we use the backward-Euler scheme for the time derivative, which will be of first-order convergent. Numerical experiments are carried out to verify theoretical results.

Ključne riječi

option pricing; Black-Scholes equation; streamline-diffusion finite element method; butterfly option

Hrčak ID:

335665

URI

https://hrcak.srce.hr/335665

Datum izdavanja:

22.9.2025.

Posjeta: 493 *