A class of fourth-order Padé schemes for fractional exotic options pricing model

Autor:	Ming-Kai Wang, Cheng Wang, Jun-Feng Yin
Jazyk:	angličtina
Rok vydání:	2022
Předmět:	fractional option pricing model padéschemes 4th-order schemes exotic option Mathematics QA1-939 Applied mathematics. Quantitative methods T57-57.97
Zdroj:	Electronic Research Archive, Vol 30, Iss 3, Pp 874-897 (2022)
Druh dokumentu:	article
ISSN:	2688-1594
DOI:	10.3934/era.2022046?viewType=HTML
Popis:	In order to reduce the oscillations of the numerical solution of fractional exotic options pricing model, a class of numerical schemes are developed and well studied in this paper which are based on the 4th-order Padé approximation and 2nd-order weighted and shifted Grünwald difference scheme. Since the spatial discretization matrix is positive definite and has lower Hessenberg Toeplitz structure, we prove the convergence of the proposed scheme. Numerical experiments on fractional digital option and fractional barrier options show that the (0, 4)-Padé scheme is fast, and significantly reduces the oscillations of the solution and smooths the Delta value.
Databáze:	Directory of Open Access Journals
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