9-13 June 2013
Koper, Slovenia
UTC timezone
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NUMERICAL METHODS FOR THE HESTON MODEL

Presented by Mr. Pavol KUTIK
Type: Oral presentation
Track: Numerical Methods for Partial Differential Equations

Content

The presentation is devoted to the numerical solution of the two-dimensional stochastic volatility Heston model aimed to find a fair price of a financial derivative contract. The governing backward parabolic partial differential differential equation will be derived and main points concerning boundary conditions will be highlighted. In order to find the solution we propose a diamond-cell-based numerical scheme and show its experimental order of convergence. Finally we introduce a split inflow-implicit/outflow-explicit variant of the first scheme as well as its stabilized version. On numerical tests we show their accuracy and their ability to keep the discrete minimum-maximum principle.

Place

Location: Koper, Slovenia

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