High-order compact schemes for Black-Scholes basket options

Bertram Düring; Christof Heuer

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arXiv · 1505.07613

High-order compact schemes for Black-Scholes basket options

Bertram Düring·Christof Heuer

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Abstract

We present a new high-order compact scheme for the multi-dimensional Black-Scholes model with application to European Put options on a basket of two underlying assets. The scheme is second-order accurate in time and fourth-order accurate in space. Numerical examples confirm that a standard second-order finite difference scheme is significantly outperformed.

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Bertram Düring, Christof Heuer. 2015-05-28. High-order compact schemes for Black-Scholes basket options. https://arxiv.org/abs/1505.07613

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