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The Use of Partial Fractional Form of A-Stable Padé Schemes for the Solution of Fractional Diffusion Equation with Application in Option Pricing

  • H. Ghafouri
  • M. RanjbarEmail author
  • A. Khani
Article
  • 25 Downloads

Abstract

In this work, we propose a numerical technique based on the Padé scheme for solving the two-sided space-fractional diffusion equation. First, space fractional diffusion equations are approximated with respect to space variable. We will achieve a system of ODE. Then by applying a parallel implementation of the A-stable methods, this system is solved. Also, we use of the presented method for pricing European call option under a geometric Lévy process. Illustrative examples are included to show the accuracy and applicability of the new technique presented in the current paper.

Keywords

Fractional diffusion equation Padé approximation A-stable method Riesz equation Option pricing 

Notes

Acknowledgements

This work has been supported financially by Azarbaijan Shahid Madani University under Grant no. 95-114.

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© Springer Science+Business Media, LLC, part of Springer Nature 2019

Authors and Affiliations

  1. 1.Department of Applied MathematicsAzarbaijan Shahid Madani UniversityTabrizIran

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