On the Stability of a Compact Finite Difference Scheme for Option Pricing

Conference paper
Part of the Mathematics in Industry book series (MATHINDUSTRY, volume 17)

Abstract

In this short paper we are concerned with the von Neumann stability analysis of a compact high-order finite difference scheme for option pricing in the Heston stochastic volatility model. We first review stability results in the case of vanishing correlation and then present some new results on the behavior of the amplification factor for non-zero correlation.

Keywords

Option Price Stochastic Volatility Stochastic Volatility Model Heston Model American Option Price 
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Copyright information

© Springer-Verlag Berlin Heidelberg 2012

Authors and Affiliations

  1. 1.Department of MathematicsUniversity of SussexBrightonUK
  2. 2.Institut de Mathématiques de ToulouseUniversité de Toulouse et CNRS (UMR 5219)ToulouseFrance

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