Finite-Volume Difference Scheme for the Black-Scholes Equation in Stochastic Volatility Models
We study numerically the two-dimensional Black-Scholes equation in stochastic volatility models . For these models, starting from the conservative form of the equation, we construct a finite-volume difference scheme using the appropriate boundary conditions. The scheme is first order accurate in the space grid size. We also present some results from numerical experiments that confirm this.
KeywordsBlack-Scholes equation dynamical boundary condition finite difference finite-volume
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