High-Order Compact Finite Difference Scheme for Option Pricing in Stochastic Volatility With Contemporaneous Jump Models

Download or read book High-Order Compact Finite Difference Scheme for Option Pricing in Stochastic Volatility With Contemporaneous Jump Models written by Bertram Düring and published by . This book was released on 2018 with total page 6 pages. Available in PDF, EPUB and Kindle. Book excerpt: We extend the scheme developed in B. Düring, A. Pitkin, ”High-order compact finite difference scheme for option pricing in stochastic volatility jump models”, 2017, to the so-called stochastic volatility with contemporaneous jumps (SVCJ) model, derived by Duffie, Pan and Singleton. The performance of the scheme is assessed through a number of numerical experiments, using comparisons against a standard second-order central difference scheme. We observe that the new high-order compact scheme achieves third order convergence alongside improvements in efficiency and computation time.