Finite Element Methods for Parabolic Problems
Part of the
book series (FINANCE)
The finite element methods are an alternative to the finite difference discretization of partial differential equations. The advantage of finite elements is that they give convergent deterministic approximations of option prices under realistic, low smoothness assumptions on the payoff function as, e.g. for binary contracts. The basis for finite element discretization of the pricing PDE is a variational formulation of the equation. Therefore, we introduce the Sobolev spaces needed in the variational formulation and give an abstract setting for the parabolic PDEs.
KeywordsOption Price Weak Derivative Riesz Representation Theorem Parabolic PDEs Element Shape Function
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.
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