An Efficient Difference Algorithm for Black-Scholes Equation with Payment of Dividend
Lifei Wu, Xiaozhong Yang
Available Online May 2014.
- https://doi.org/10.2991/iccia.2012.113How to use a DOI?
- component, Black-Scholes equation, Three-layer difference scheme, calculation stability, error estimate, numerical example
- Black-Scholes equation is the basic equation of option pricing in financial mathematics, it is important to study its numerical solution in financial market. This paper constructs a new kind of high order accuracy numerical algorithm (Three-layer difference scheme) for Black-Scholes equation with payment of dividend. Secondly, it gives the convergence of scheme. Thirdly, the stability and error estimates are analyzed. Finally, the numerical examples show the feasibility and effectiveness of the scheme. The truncation error of Three-layer scheme is little worse than Crank-Nicolson scheme and computational cost is little better than Crank-Nicoslon scheme. Therefore, the scheme is better suitable for applying to calculate the option pricing in the demanding high level of instantaneity.
- Open Access
- This is an open access article distributed under the CC BY-NC license.
Cite this article
TY - CONF AU - Lifei Wu AU - Xiaozhong Yang PY - 2014/05 DA - 2014/05 TI - An Efficient Difference Algorithm for Black-Scholes Equation with Payment of Dividend BT - Proceedings of the 2012 2nd International Conference on Computer and Information Application (ICCIA 2012) PB - Atlantis Press SP - 470 EP - 473 SN - 1951-6851 UR - https://doi.org/10.2991/iccia.2012.113 DO - https://doi.org/10.2991/iccia.2012.113 ID - Wu2014/05 ER -