Work

Efficient hedging in Bates model using high-order compact finite differences

Year: 2017

Type: preprint

Abstract: We evaluate the hedging performance of a high-order compact finite difference scheme from [4] for option pricing in Bates model. We compare the scheme's hedging performance to standard finite difference methods in different examples. We observe that the new scheme outperforms a standard, second-order central finite difference approximation in all our experiments.

Source: arXiv (Cornell University)

DOI: 10.48550/arxiv.1710.05542

Authors: Düring, Bertram, Pitkin, Alexander

Institution: University of Sussex

Language: English

Topic: Stochastic processes and financial applications

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

Funders: Leverhulme Trust, Engineering and Physical Sciences Research Council

Awards: G3777965847, DTA - University of Sussex, G5200278345