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Exponential Time Integration and Second-Order Difference Scheme for a Generalized Black-Scholes Equation

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  • Zhongdi Cen
  • Anbo Le
  • Aimin Xu

Abstract

We apply an exponential time integration scheme combined with a central difference scheme on a piecewise uniform mesh with respect to the spatial variable to evaluate a generalized Black-Scholes equation. We show that the scheme is second-order convergent for both time and spatial variables. It is proved that the scheme is unconditionally stable. Numerical results support the theoretical results.

Suggested Citation

  • Zhongdi Cen & Anbo Le & Aimin Xu, 2012. "Exponential Time Integration and Second-Order Difference Scheme for a Generalized Black-Scholes Equation," Journal of Applied Mathematics, Hindawi, vol. 2012, pages 1-12, February.
    • Handle: RePEc:hin:jnljam:796814
    DOI: 10.1155/2012/796814
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