A Compact Difference Scheme for European Contingent Claim in Generalized CEV Models
A compact difference scheme is proposed to solve the problem of European contingent claim pricing under generalized CEV model.Firstly,the time is semi-discretized using the Crank-Nicolson scheme.Secondly,on the basis of time discretization,the space is discretized using compact differential scheme,and a compact differential scheme with time order 2 and space order 4 precision is constructed.The scheme is proved to be unconditionally stable.Finally,the feasibility of the proposed method is verified by numerical experiments.
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