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Time-adaptive high-order compact finite difference schemes for option pricing in a family of stochastic volatility models

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  • Bertram During
  • Christof Heuer

Abstract

We propose a time-adaptive, high-order compact finite difference scheme for option pricing in a family of stochastic volatility models. We employ a semi-discrete high-order compact finite difference method for the spatial discretisation, and combine this with an adaptive time discretisation, extending ideas from [LSRHF02] to fourth-order multistep methods in time.

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  • Bertram During & Christof Heuer, 2021. "Time-adaptive high-order compact finite difference schemes for option pricing in a family of stochastic volatility models," Papers 2107.09094, arXiv.org.
    • Handle: RePEc:arx:papers:2107.09094
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    1. Peter Christoffersen & Kris Jacobs & Karim Mimouni, 2010. "Volatility Dynamics for the S&P500: Evidence from Realized Volatility, Daily Returns, and Option Prices," The Review of Financial Studies, Society for Financial Studies, vol. 23(8), pages 3141-3189, August.
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