European and American put valuation via a high-order semi-discretization scheme

Document Type : Research Paper

Author

Faculty of Basic Science, Shahrekord Branch, Islamic Azad University, Shahrekord, Iran

Abstract

Put options are commonly used in the stock market to protect against the decline of the price of a stock below a specified price. On the other hand, finite difference approach is a well-known and well-resulted numerical scheme for financial differential equations. As such in this work, a new spatial discretization based on finite difference semi-discretization procedure with high order of accuracy is constructed for the problem of European and American put options. Several numerical experiments are also worked out.

Keywords


Volume 6, Issue 1
January 2018
Pages 63-79
  • Receive Date: 14 May 2017
  • Revise Date: 12 July 2017
  • Accept Date: 28 November 2017
  • First Publish Date: 01 January 2018