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Convergence analysis of an IMEX scheme for option pricing under stochastic intensity jump model with mixed fractional Brownian motion

Year: 2026

Type: article

Abstract: This paper proposes and analyzes an implicit-explicit (IMEX) difference scheme for solving a two-dimensional variable-coefficient partial integro-differential equation (PIDE). The equation arises from option pricing under a stochastic intensity jump model driven by mixed fractional Brownian motion. First, an IMEX scheme is developed to solve the two-dimensional main PIDE along with its associated boundary condition, which is governed by a one-dimensional PIDE. The second-order convergence rate of the scheme is rigorously established for the boundary PIDE in the discrete $H^{1}$ -norm and for the main PIDE in the discrete $L^{2}$ -norm. Finally, numerical experiments are conducted to validate the theoretical results.

Source: Advances in Continuous and Discrete Models

DOI: 10.1186/s13662-026-04125-9

Authors: Leixiao Huang, Shuang Zhao, Zhengguang Shi

Institution: Sichuan Normal University

Language: English

Topic: Stochastic processes and financial applications

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: hybrid

Estimated APC paid: $1,890

OpenAlex ID: W7208745711

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