Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/85220 
Year of Publication: 
2001
Series/Report no.: 
CoFE Discussion Paper No. 01/07
Publisher: 
University of Konstanz, Center of Finance and Econometrics (CoFE), Konstanz
Abstract: 
A nonlinear Black-Scholes equation which models transaction costs arising in the hedging of portfolios is discretized semi-implicitly using high order compact finite difference schemes. In particular, the compact schemes of Rigal are generalized. The numerical results are compared to standard finite difference schemes. It turns out that the compact schemes have very satisfying stability and non-oscillatory properties and are generally more e±cient than the considered classical schemes.
Subjects: 
Option pricing
transaction costs
parabolic equations
compact finite difference discretizations
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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