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Numerical Algorithms

, Volume 74, Issue 1, pp 59–75 | Cite as

Fourth-order compact schemes for a parabolic-ordinary system of European option pricing liquidity shocks model

  • Miglena N. Koleva
  • Walter Mudzimbabwe
  • Lubin G. Vulkov
Original Paper

Abstract

This paper provides a numerical investigation for European options under parabolic-ordinary system modeling markets to liquidity shocks. Our main results concern construction and analysis of fourth order in space compact finite difference schemes (CFDS). Numerical experiments using Richardson extrapolation in time are discussed.

Keywords

Option pricing High-order compact difference scheme Convergence Richardson extrapolation 

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Copyright information

© Springer Science+Business Media New York 2016

Authors and Affiliations

  • Miglena N. Koleva
    • 1
  • Walter Mudzimbabwe
    • 2
  • Lubin G. Vulkov
    • 2
  1. 1.Department of MathematicsRuse UniversityRuseBulgaria
  2. 2.Department of Applied Mathematics and StatisticsRuse UniversityRuseBulgaria

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