Work

An efficient robust computational method for solving Black-Scholes PDEs

Year: 2025

Type: article

Abstract: 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.

Source: Mathematical communications

DOI: 10.64785/mc.30.2.4

Authors: Saurabh Bansal, Natesan Srinivasan

Institution: Indian Institute of Technology Guwahati

Language: English

Topic: Stochastic processes and financial applications

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: diamond

OpenAlex ID: W4414420355

FWCI:

Cites:

Cited by:

Related to: