A novel fitted finite volume method for the Black-Scholes equation governing option pricing

2004 ◽  
Vol 24 (4) ◽  
pp. 699-720 ◽  
Author(s):  
S. Wang
Keyword(s):  
Option Pricing ◽  
Finite Volume Method ◽  
Finite Volume ◽  
Black Scholes ◽  
Volume Method

scholarly journals A Fitted L-Multi-Point Flux Approximation Method for Pricing Options

2021 ◽  
Author(s):  
Rock Stephane Koffi ◽  
Antoine Tambue
Keyword(s):  
Finite Volume Method ◽  
Finite Volume ◽  
Approximation Method ◽  
Special Kind ◽  
Diffusion Term ◽  
Pricing Options ◽  
Flux Approximation ◽  
Black Scholes ◽  
Upwind Methods ◽  
Volume Method

AbstractIn this paper, we introduce a special kind of finite volume method called Multi-Point Flux Approximation method (MPFA) to price European and American options in two dimensional domain. We focus on the L-MPFA method for space discretization of the diffusion term of Black–Scholes operator. The degeneracy of the Black-Scholes operator is tackled using the fitted finite volume method. This combination of fitted finite volume method and L-MPFA method coupled to upwind methods gives us a novel scheme, called the fitted L-MPFA method. Numerical experiments show the accuracy of the novel fitted L-MPFA method comparing to well known schemes for pricing options.

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