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Comparison of numerical methods for the aproximation of option price


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  • S. Sanfelici


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    In this work, we analyse different numerical methods for the approximation of the Black-Scholes equation for the European option pricing. Such an equation presents two main sources of difficulties with regards to its discretization…We explore the effects of both characteristics in terms of numerical stability and convergence and propose som trasformations of the advection-diffusion equation which, in some cases, can alleviate these problems.

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    Bibliographic Info

    Paper provided by Department of Economics, Parma University (Italy) in its series Economics Department Working Papers with number 2001-ME01.

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    Length: 21 pages
    Date of creation: 2001
    Date of revision:
    Handle: RePEc:par:dipeco:2001-me01

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