Numerical solution of modified Black–Scholes equation pricing stock options with discrete dividend

This paper deals with the numerical solution of the modified Black–Scholes equation modelling the valuation of stock options with discrete dividend payments. By using a delta-defining sequence of the involved generalized Dirac delta function and applying the Mellin transform, an integral formula for the solution is obtained. Then, numerical quadrature approximations and illustrative examples are given.     

Conservation laws for the Black–Scholes equation

In the search for solutions to the important partial differential equation due to Black, Scholes and Merton potential symmetries are very useful as new solutions of the equation can be obtained as a result. These potential symmetries require that the equation be written in conserved form, ie. we need to determine conservation laws for the equation. We calculate the conservation laws utilizing the point symmetries of the equation following the method of Kara and Mahomed [A.H. Kara, F.M. Mahomed, The relationship between symmetries and conservation laws, Int. J. Theor. Phys. 39 (2000) 23–40].     

A superconvergent fitted finite volume method for Black–Scholes equations governing European and American option valuation

We develop a superconvergent fitted finite volume method for a degenerate nonlinear penalized Black–Scholes equation arising in the valuation of European and American options, based on the fitting idea in Wang [IMA J Numer Anal 24 (2004), 699–720]. Unlike conventional finite volume methods in which the dual mesh points are naively chosen to be the midpoints of the subintervals of the primal mesh, we construct the dual mesh judiciously using an error representation for the flux interpolation so that both the approximate flux and solution have the second‐order accuracy at the mesh points without any increase in computational costs. As the equation is degenerate, we also show that it is essential to refine the meshes locally near the degenerate point in order to maintain the second‐order accuracy. Numerical results for both European and American options with constant and nonconstant coefficients will be presented to demonstrate the superconvergence of the method. © 2014 Wiley Periodicals, Inc. Numer Methods Partial Differential Eq 31: 1190–1208, 2015     

Applications to give an analytical solution to the Black Scholes equation

A simple ?-function and its dynamic equation is presented. An application to give an analytical solution to the Black Scholes equation is presented.     

Fractional model and solution for the Black‐Scholes equation

This work presents a new model of the fractional Black‐Scholes equation by using the right fractional derivatives to model the terminal value problem. Through nondimensionalization and variable replacements, we convert the terminal value problem into an initial value problem for a fractional convection diffusion equation. Then the problem is solved by using the Fourier‐Laplace transform. The fundamental solutions of the derived initial value problem are given and simulated and display a slow anomalous diffusion in the fractional case.     

A numerical method for European Option Pricing with transaction costs nonlinear equation

This paper deals with the construction of a finite difference scheme and the numerical analysis of its solution for a nonlinear Black–Scholes partial differential equation modelling stock option pricing in the realistic case when transaction costs arising in the hedging of portfolios are taken into account. The analysed model is the Barles–Soner one for which an appropriate fully nonlinear numerical method has not still applied. After construction of the numerical solution, consistency and stability are studied and some illustrative examples are included.     

A numerical scheme for the solution of viscous Cahn–Hilliard equation

In this paper, we present a numerical scheme for the solution of viscous Cahn–Hilliard equation. The scheme is based on Adomian's decomposition approach and the solutions are calculated in the form of a convergent series with easily computable components. Some numerical examples are presented. © 2007 Wiley Periodicals, Inc. Numer Methods Partial Differential Eq 2008     

Exact solutions via invariant approach for Black‐Scholes model with time‐dependent parameters

We analyze the Black‐Scholes model with time‐dependent parameters, and it is governed by a parabolic partial differential equation (PDE). First, we compute the Lie symmetries of the Black‐Scholes model with time‐dependent parameters. It admits 6 plus infinite many Lie symmetries, and thus, it can be reduced to the classical heat equation. We use the invariant criteria for a scalar linear (1+1) parabolic PDE and obtain 2 sets of equivalence transformations. With the aid of these equivalence transformations, the Black‐Scholes model with time‐dependent parameters transforms to the classical heat equation. Moreover, the functional forms of the time‐dependent parameters in the PDE are determined via this method. Then we use the equivalence transformations and known solutions of the heat equation to establish a number of exact solutions for the Black‐Scholes model with time‐dependent parameters.     

Positive numerical splitting method for the Hull and White 2D Black–Scholes equation

We consider the locally one‐dimensional backward Euler splitting method to solve numerically the Hull and White problem for pricing European options with stochastic volatility in the presence of a mixed derivative term. We prove the first‐order convergence of the time‐splitting. The parabolic equation degenerates on the boundary x = 0 and we apply a fitted finite volume scheme to the equation to resolve the degeneracy and derive the fully discrete problem as we also investigate the discrete maximum principle. Numerical experiments illustrate the efficiency of our difference scheme. © 2014 Wiley Periodicals, Inc. Numer Methods Partial Differential Eq 31: 822–846, 2015     

Exact solutions with compact and noncompact structures for the one-dimensional generalized Benjamin–Bona–Mahony equation

This paper is devoted to analyzing the physical structures of nonlinear dispersive variants of the Benjamin–Bona–Mahony equation. It is found that these generalized forms give rise to compactons solutions: solitons with the absence of infinite tails, solitons: nonlinear localized waves of infinite support, solitary patterns solutions having infinite slopes or cusps, and plane periodic solutions. It is also found that the qualitative change in the physical structure of solutions depends strongly on whether the exponents of the wave function u(x, t) whether it is positive or negative, and on the speed c of the traveling wave as well.     

The planar radiosity equation and its numerical solution

This article gives properties of the planar radiosity equationand methods for its numerical solution. Regularity propertiesof the radiosity solution are examined, including both the effectsof corners and the effects of the visibility function. Theseare taken into account in the design of collocation methodswith piecewise polynomial approximating functions. Numericalexamples conclude the paper.     

Test for dispersion constancy in stochastic differential equation models

In this paper, we propose a constancy test for volatility in It processes based on discretely sampled data. The test statistic constitutes an integration of the Ljung–Box test statistic and the kurtosis statistic in the Jarque–Bera test. It is shown that under regularity conditions, the proposed test asymptotically follows a chi‐square distribution under the null hypothesis of constant volatility. To evaluate the test, empirical sizes and powers were examined through a simulation study. Analysis of real data including ultra‐high frequency transaction data and interest rates was also conducted for illustration. Copyright © 2011 John Wiley & Sons, Ltd.     

Analytical and numerical solutions of the Fitzhugh–Nagumo equation and their multistability behavior

In this paper, we propose an analytical method and a modification of explicit exponential finite difference method (EEFDM) for analytical and numerical solutions of the Fitzhugh–Nagumo (FN) and Newell–Whitehead (NW) equations. The method is improved computationally by using the Padé approximation technique. Furthermore, multistability behavior of traveling wave solutions of the FN and NW equations are examined in presence of external forcing. It is observed that there exist coexisting periodic and quasiperiodic orbits for the FN equation, where as only quasiperiodic orbits is observed in case of NW equation.     

Exact solutions of Calgero–Bogoyavlenskii–Schiff equation using the singular manifold method after Lie reductions

Calgero–Bogoyavlenskii–Schiff (CBS) equation is analytically solved through two successive reductions into an ordinary differential equation (ODE) through a set of optimal Lie vectors. During the second reduction step, CBS equation is reduced using hidden vectors. The resulting ODE is then analytically solved through the singular manifold method in three steps; First, a Bäcklund truncated series is obtained. Second, this series is inserted into the ODE, and finally, a seminal analysis leads to a Schwarzian differential equation in the eigenfunction φ(η). Solving this differential equation leads to new analytical solutions. Then, through two backward substitution steps, the original dependent variable is recovered. The obtained results are plotted for several Lie hidden vectors and compared with previous work on CBS equation using Lie transformations. Copyright © 2017 John Wiley & Sons, Ltd.     

Conservation laws for Camassa–Holm equation, Dullin–Gottwald–Holm equation and generalized Dullin–Gottwald–Holm equation

In this paper we construct the conservation laws for the Camassa–Holm equation, the Dullin–Gottwald–Holm equation (DGH) and the generalized Dullin–Gottwald–Holm equation (generalized DGH). The variational derivative approach is used to derive the conservation laws. Only first order multipliers are considered. Two multipliers are obtained for the Camassa–Holm equation. For the DGH and generalized DGH equations the variational derivative approach yields two multipliers; thus two conserved vectors are obtained.     

A numerical method for the Landau–Lifshitz equation with magnetostriction

We present a numerical scheme for Landau–Lifshitz–Gilbert equation coupled with the equation of elastodynamics. The considered physical model describes the behaviour of ferromagnetic materials when magnetomechanical coupling is taken into account. The time‐discretization is based on the backward Euler method with projection. In the numerical approximation, the two equations are decoupled by a suitable linearization in order to solve the magnetic and mechanic part separately. The resulting semi‐implicit scheme is linear and allows larger time‐steps than explicit methods. We prove stability and error estimates for the presented time discretization in 2D. Finally, we test the accuracy of the scheme on an academic numerical example with known exact solution. Copyright © 2005 John Wiley & Sons, Ltd.     

Convergence of a discrete Oort–Hulst–Safronov equation

A discrete version of the Oort–Hulst–Safronov (OHS) coagulation equation is studied. Besides the existence of a solution to the Cauchy problem, it is shown that solutions to a suitable sequence of those discrete equations converge towards a solution to the OHS equation. Copyright © 2005 John Wiley & Sons, Ltd.     

矩阵方程的对称解及其逆矩阵的数值解法

基于矩阵方程LS＋SL^T=[p,q]求解对称矩阵S,得到了唯一解的充要条件和解的递推计算式,进一步研究了逆矩阵S-1的求法,数值算例说明了递推计算式的正确性.     

A numerical method for the Cahn–Hilliard equation with a variable mobility

We consider a conservative nonlinear multigrid method for the Cahn–Hilliard equation with a variable mobility of a model for phase separation in a binary mixture. The method uses the standard finite difference approximation in spatial discretization and the Crank–Nicholson semi-implicit scheme in temporal discretization. And the resulting discretized equations are solved by an efficient nonlinear multigrid method. The continuous problem has the conservation of mass and the decrease of the total energy. It is proved that these properties hold for the discrete problem. Also, we show the proposed scheme has a second-order convergence in space and time numerically. For numerical experiments, we investigate the effects of a variable mobility.