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Matematika IPB

Informasi Publikasi

Judul Artikel : An upwind finite difference method for a nonlinear Black–Scholes equation governing European option valuation under transaction costs
Penulis : Lesmana DC, Wang S (2013)
Judul Publikasi : Applied Mathematics and Computation Vol.219 No.16 hal. 8811–8828
Jenis : artikel
Bahasa : Inggris
Abstrak : In this paper we develop a numerical method for a nonlinear parabolic partial differential equation arising from pricing European options under transaction costs. The method is based on an upwind finite difference scheme for the spatial discretization and a fully implicit time-stepping scheme. We prove that the system matrix from this scheme is an M-matrix and that the approximate solution converges unconditionally to the viscosity solution to the equation by showing that the scheme is consistent, monotone and unconditionally stable. A Newton iterative algorithm is proposed for solving the discretized nonlinear system of which the Jacobian matrix is shown to be also an M-matrix. Numerical experiments are performed to demonstrate the accuracy and robustness of the method.
URL : link
Link Penulis
No Nama Dosen
1 Dr. Donny Citra Lesmana, S.Si., M.Fin.Math.

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