Abstract
This chapter concerns the numerical pricing of European options for markets with liquidity shocks. We derive and analyze high-order weighted compact finite difference schemes (WCFDS). Numerical simulations for the price and Greeks, using WCFDS combined with Richardson extrapolation in time are presented.
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Acknowledgements
This research was supported by the European Union under Grant Agreement number 304617 (FP7 Marie Curie Action Project Multi-ITN STRIKE—Novel Methods in Computational Finance) and the Bulgarian National Fund of Science under Project I02/20-2014.
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Koleva, M.N., Mudzimbabwe, W., Vulkov, L.G. (2017). High Order Compact Schemes for Option Pricing with Liquidity Shocks. In: Ehrhardt, M., Günther, M., ter Maten, E. (eds) Novel Methods in Computational Finance. Mathematics in Industry(), vol 25. Springer, Cham. https://doi.org/10.1007/978-3-319-61282-9_18
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DOI: https://doi.org/10.1007/978-3-319-61282-9_18
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