Adaptive Scheme for Black-Scholes Equation using Hermite Cubic Spline Wavelets
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Date
2018
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Abstract
This contribution is devoted to the wavelet based adaptive numerical solution of the Black-Scholes equation for pricing European options. We apply the Crank-Nicolson scheme with Richardson extrapolation for time discretization and Hermite cubic spline wavelets with four vanishing moments for space discretization. The proposed scheme enables higher order approximation and exploits compression properties of wavelets. This scheme is the fourth order accurate both in time and in space. A numerical example is presented for the Black-Scholes equation with real data.
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options