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An Efficient Method for Solving Spread Option Pricing Problem: Numerical Analysis and Computing

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  • R. Company
  • V. N. Egorova
  • L. Jódar

Abstract

This paper deals with numerical analysis and computing of spread option pricing problem described by a two‐spatial variables partial differential equation. Both European and American cases are treated. Taking advantage of a cross derivative removing technique, an explicit difference scheme is developed retaining the benefits of the one‐dimensional finite difference method, preserving positivity, accuracy, and computational time efficiency. Numerical results illustrate the interest of the approach.

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Handle: RePEc:wly:jnlaaa:v:2016:y:2016:i:1:n:1549492
DOI: 10.1155/2016/1549492
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