An efficient method for solving spread option pricing problem: numerical analysis and computing. (English) Zbl 1470.91323

Company, R.; Egorova, V. N.; Jódar, L.

Abstr. Appl. Anal. 2016, Article ID 1549492, 11 p. (2016).

Summary: This paper deals with numerical analysis and computing of spread option pricing problem described by a two-spatial variables partial differential equation. Both European and American cases are treated. Taking advantage of a cross derivative removing technique, an explicit difference scheme is developed retaining the benefits of the one-dimensional finite difference method, preserving positivity, accuracy, and computational time efficiency. Numerical results illustrate the interest of the approach.

MSC:

91G60	Numerical methods (including Monte Carlo methods)
65M06	Finite difference methods for initial value and initial-boundary value problems involving PDEs
91G20	Derivative securities (option pricing, hedging, etc.)

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