Stability of central finite difference schemes for the Heston PDE
AbstractThis paper deals with stability in the numerical solution of the prominent Heston partial differential equation from mathematical finance. We study the well-known central second-order finite difference discretization, which leads to large semi-discrete systems with non-normal matrices A. By employing the logarithmic spectral norm we prove practical, rigorous stability bounds. Our theoretical stability results are illustrated by ample numerical experiments.
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Bibliographic InfoPaper provided by arXiv.org in its series Papers with number 1011.6532.
Date of creation: Nov 2010
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Publication status: Published in Numer. Algor. 60, 115-133 (2012)
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Web page: http://arxiv.org/
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-12-11 (All new papers)
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