High-order compact schemes for Black-Scholes basket options
classification
💱 q-fin.CP
math.NA
keywords
schemeaccuratebasketblack-scholescompacthigh-orderoptionssecond-order
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We present a new high-order compact scheme for the multi-dimensional Black-Scholes model with application to European Put options on a basket of two underlying assets. The scheme is second-order accurate in time and fourth-order accurate in space. Numerical examples confirm that a standard second-order finite difference scheme is significantly outperformed.
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