An IMEX‐BDF2 compact scheme for pricing options under regime‐switching jump‐diffusion models

In this paper, an implicit‐explicit two‐step backward differentiation formula (IMEX‐BDF2) together with finite difference compact scheme is developed for the numerical pricing of European and American options whose asset price dynamics follow the regime‐switching jump‐diffusion process. It is shown that IMEX‐BDF2 method for solving this system of coupled partial integro‐differential equations is stable with the second‐order accuracy in time. On the basis of IMEX‐BDF2 time semi‐discrete method, we derive a fourth‐order compact (FOC) finite difference scheme for spatial discretization. Since the payoff function of the option at the strike price is not differentiable, the results show only second‐order accuracy in space. To remedy this, a local mesh refinement strategy is used near the strike price so that the accuracy achieves fourth order. Numerical results illustrate the effectiveness of the proposed method for European and American options under regime‐switching jump‐diffusion models.     

Convergence analysis of some high–order time accurate schemes for a finite volume method for second order hyperbolic equations on general nonconforming multidimensional spatial meshes

The present work is an extension of our previous work (Bradji, Numer Methods Partial Differ Equations, to appear) which dealt with error analysis of a finite volume scheme of a first convergence order (both in time and space) for second‐order hyperbolic equations on general nonconforming multidimensional spatial meshes introduced recently in (Eymard et al. IMAJ Numer Anal 30(2010), 1009–1043). We aim in this article to get some higher‐order time accurate schemes for a finite volume method for second‐order hyperbolic equations using the same class of spatial generic meshes stated above. We derive a family of finite volume schemes approximating the wave equation, as a model for second‐order hyperbolic equations, in which the discretization in time is performed using a one‐parameter scheme of the Newmark's method. We prove that the error estimate of these finite volume schemes is of order two (or four) in time and it is of optimal order in space. These error estimates are analyzed in several norms which allow us to derive approximations for the exact solution and its first derivatives whose the convergence order is two (or four) in time and it is optimal in space. We prove in particular, when the discrete flux is calculated using a stabilized discrete gradient, that the convergence order is \begin{align*}k^2+h_\mathcal{D}\end{align*} or \begin{align*}k^4+h_\mathcal{D}\end{align*}, where \begin{align*}h_\mathcal{D}\end{align*} (resp. k) is the mesh size of the spatial (resp. time) discretization. These estimates are valid under the regularity assumption \begin{align*}u\in C^4(\lbrack 0,T\rbrack;C^2(\overline{\Omega}))\end{align*}, when the schemes are second‐order accurate in time, and \begin{align*}u\in C^6(\lbrack 0,T\rbrack;C^2(\overline{\Omega}))\end{align*}, when the schemes are four‐order accurate in time for the exact solution u. The proof of these error estimates is based essentially on a comparison between the finite volume approximate solution and an auxiliary finite volume approximation. © 2012 Wiley Periodicals, Inc. Numer Methods Partial Differential Eq, 2013     

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     

Monotone combined edge finite volume–finite element scheme for Anisotropic Keller–Segel model

In this article, a new numerical scheme for a degenerate Keller–Segel model with heterogeneous anisotropic tensors is treated. It is well‐known that standard finite volume scheme not permit to handle anisotropic diffusion without any restrictions on meshes. Therefore, a combined finite volume‐nonconforming finite element scheme is introduced, developed, and studied. The unknowns of this scheme are the values at the center of cell edges. Convergence of the approximate solution to the continuous solution is proved only supposing the shape regularity condition for the primal mesh. This scheme ensures the validity of the discrete maximum principle under the classical condition that all transmissibilities coefficients are positive. Therefore, a nonlinear technique is presented, as a correction of the diffusive flux, to provide a monotone scheme for general tensors. © 2014 Wiley Periodicals, Inc. Numer Methods Partial Differential Eq 30: 1030–1065, 2014     

A note on finite difference discretizations for Poisson equation on a disk

A simple second‐order finite difference treatment of polar coordinate singularity for Poisson equation on a disk is presented. By manipulating the grid point locations, we can successfully avoid finding numerical boundary condition at the origin so that the resulting matrix is simpler than traditional schemes. The treatments for Dirichlet and Neumann boundary problems are slightly different by adjusting the radial mesh width. Furthermore, the present discretization can be applied with slight modifications to Helmholtz‐type equations. The numerical evidence shows that the second‐order accuracy can also be preserved. © 2001 John Wiley & Sons, Inc. Numer Methods Partial Differential Eq 17: 199–203, 2001     

Nonuniform Crank‐Nicolson scheme for solving the stochastic Kawarada equation via arbitrary grids

This article studies a nonuniform finite difference method for solving the degenerate Kawarada quenching‐combustion equation with a vibrant stochastic source. Arbitrary grids are introduced in both space and time via adaptive principals to accommodate the uncertainty and singularities involved. It is shown that, under proper constraints on mesh step sizes, the positivity, monotonicity of the solution, and numerical stability of the scheme developed are well preserved. Numerical experiments are given to illustrate our conclusions. © 2017 Wiley Periodicals, Inc. Numer Methods Partial Differential Eq 33: 1305–1328, 2017     

A three‐level linearized finite difference scheme for the camassa–holm equation

The Camassa–Holm (CH) system is a strong nonlinear third‐order evolution equation. So far, the numerical methods for solving this problem are only a few. This article deals with the finite difference solution to the CH equation. A three‐level linearized finite difference scheme is derived. The scheme is proved to be conservative, uniquely solvable, and conditionally second‐order convergent in both time and space in the discrete L_∞ norm. Several numerical examples are presented to demonstrate the accuracy and efficiency of the proposed method. © 2013 Wiley Periodicals, Inc. Numer Methods Partial Differential Eq 30: 451–471, 2014     

Convergence analysis of some first order and second order time accurate gradient schemes for semilinear second order hyperbolic equations

This work is devoted to the convergence analysis of finite volume schemes for a model of semilinear second order hyperbolic equations. The model includes for instance the so‐called Sine‐Gordon equation which appears for instance in Solid Physics (cf. Fang and Li, Adv Math (China) 42 (2013), 441–457; Liu et al., Numer Methods Partial Differ Equ 31 (2015), 670–690). We are motivated by two works. The first one is Eymard et al. (IMA J Numer Anal 30 (2010), 1009–1043) where a recent class of nonconforming finite volume meshes is introduced. The second one is Eymard et al. (Numer Math 82 (1999), 91–116) where a convergence of a finite volume scheme for semilinear elliptic equations is provided. The mesh considered in Eymard et al. (Numer Math 82 (1999), 91–116) is admissible in the sense of Eymard et al. (Elsevier, Amsterdam, 2000, 723–1020) and a convergence of a family of approximate solutions toward an exact solution when the mesh size tends to zero is proved. This article is also a continuation of our previous two works (Bradji, Numer Methods Partial Differ Equ 29 (2013), 1278–1321; Bradji, Numer Methods Partial Differ Equ 29 (2013), 1–39) which dealt with the convergence analysis of implicit finite volume schemes for the wave equation. We use as discretization in space the generic spatial mesh introduced in Eymard et al. (IMA J Numer Anal 30 (2010), 1009–1043), whereas the discretization in time is performed using a uniform mesh. Two finite volume schemes are derived using the discrete gradient of Eymard et al. (IMA J Numer Anal 30 (2010), 1009–1043). The unknowns of these two schemes are the values at the center of the control volumes, at some internal interfaces, and at the mesh points of the time discretization. The first scheme is inspired from the previous work (Bradji, Numer Methods Partial Differ Equ 29 (2013), 1–39), whereas the second one (in which the discretization in time is performed using a Newmark method) is inspired from the work (Bradji, Numer Methods Partial Differ Equ 29 (2013), 1278–1321). Under the assumption that the mesh size of the time discretization is small, we prove the existence and uniqueness of the discrete solutions. If we assume in addition to this that the exact solution is smooth, we derive and prove three error estimates for each scheme. The first error estimate is concerning an estimate for the error between a discrete gradient of the approximate solution and the gradient of the exact solution whereas the second and the third ones are concerning the estimate for the error between the exact solution and the discrete solution in the discrete seminorm of and in the norm of . The convergence rate is proved to be for the first scheme and for the second scheme, where (resp. k) is the mesh size of the spatial (resp. time) discretization. The existence, uniqueness, and convergence results stated above do not require any relation between k and . The analysis presented in this work is also applicable in the gradient schemes framework. © 2016 Wiley Periodicals, Inc. Numer Methods Partial Differential Eq 33: 5–33, 2017     

A second‐order finite difference scheme for solving the dual‐phase‐lagging equation in a double‐layered nanoscale thin film

This article considers the dual‐phase‐lagging (DPL) heat conduction equation in a double‐layered nanoscale thin film with the temperature‐jump boundary condition (i.e., Robin's boundary condition) and proposes a new thermal lagging effect interfacial condition between layers. A second‐order accurate finite difference scheme for solving the heat conduction problem is then presented. In particular, at all inner grid points the scheme has the second‐order temporal and spatial truncation errors, while at the boundary points and at the interfacial point the scheme has the second‐order temporal truncation error and the first‐order spatial truncation error. The obtained scheme is proved to be unconditionally stable and convergent, where the convergence order in ‐norm is two in both space and time. A numerical example which has an exact solution is given to verify the accuracy of the scheme. The obtained scheme is finally applied to the thermal analysis for a gold layer on a chromium padding layer at nanoscale, which is irradiated by an ultrashort‐pulsed laser. © 2016 Wiley Periodicals, Inc. Numer Methods Partial Differential Eq 33: 142–173, 2017     

Nonconforming finite element methods with subgrid viscosity applied to advection‐diffusion‐reaction equations

A nonconforming (Crouzeix–Raviart) finite element method with subgrid viscosity is analyzed to approximate advection‐diffusion‐reaction equations. The error estimates are quasi‐optimal in the sense that keeping the Péclet number fixed, the estimates are suboptimal of order in the mesh size for the L²‐norm and optimal for the advective derivative on quasi‐uniform meshes. The method is also reformulated as a finite volume box scheme providing a reconstruction formula for the diffusive flux with local conservation properties. Numerical results are presented to illustrate the error analysis. © 2006 Wiley Periodicals, Inc. Numer Methods Partial Differential Eq, 2006     

A theoretical analysis of a new finite volume scheme for second order hyperbolic equations on general nonconforming multidimensional spatial meshes

We consider the wave equation, on a multidimensional spatial domain. The discretization of the spatial domain is performed using a general class of nonconforming meshes which has been recently studied for stationary anisotropic heterogeneous diffusion problems, see Eymard et al. (IMAJ Numer Anal 30 (2010), 1009–1043). The discretization in time is performed using a uniform mesh. We derive a new implicit finite volume scheme approximating the wave equation and we prove error estimates of the finite volume approximate solution in several norms which allow us to derive error estimates for the approximations of the exact solution and its first derivatives. We prove in particular, when the discrete flux is calculated using a stabilized discrete gradient, the convergence order is \begin{align*} h_\mathcal{D}\end{align*} (resp. k) is the mesh size of the spatial (resp. time) discretization. This estimate is valid under the regularity assumption \begin{align*}u\in C^3(\lbrack 0,T\rbrack;C^2(\overline{\Omega}))\end{align*} for the exact solution u. The proof of these error estimates is based essentially on a comparison between the finite volume approximate solution and an auxiliary finite volume approximation. © 2012 Wiley Periodicals, Inc. Numer Methods Partial Differential Eq, 2013     

An optimal‐order error estimate for a Galerkin‐mixed finite‐element time‐stepping procedure for porous media flows

This article deals with the numerical approximation of miscible displacement problem of one incompressible fluid in a porous medium. The adopted formulation is based on the combined use of a mixed finite‐element scheme to treat pressure equation and of the finite‐element approach to treat concentration equation. Optimal‐order error estimates are obtained under some milder mesh‐parameter constraints. © 2011 Wiley Periodicals, Inc. Numer Methods Partial Differential Eq 28: 707–719, 2012     

A high‐order finite difference method for 1D nonhomogeneous heat equations

In this article a sixth‐order approximation method (in both temporal and spatial variables) for solving nonhomogeneous heat equations is proposed. We first develop a sixth‐order finite difference approximation scheme for a two‐point boundary value problem, and then heat equation is approximated by a system of ODEs defined on spatial grid points. The ODE system is discretized to a Sylvester matrix equation via boundary value method. The obtained algebraic system is solved by a modified Bartels‐Stewart method. The proposed approach is unconditionally stable. Numerical results are provided to illustrate the accuracy and efficiency of our approximation method along with comparisons with those generated by the standard second‐order Crank‐Nicolson scheme as well as Sun‐Zhang's recent fourth‐order method. © 2008 Wiley Periodicals, Inc. Numer Methods Partial Differential Eq, 2009     

Uniform convergence analysis of hybrid numerical scheme for singularly perturbed problems of mixed type

In this article, we consider a class of singularly perturbed mixed parabolic‐elliptic problems whose solutions possess both boundary and interior layers. To solve these problems, a hybrid numerical scheme is proposed and it is constituted on a special rectangular mesh which consists of a layer resolving piecewise‐uniform Shishkin mesh in the spatial direction and a uniform mesh in the temporal direction. The domain under consideration is partitioned into two subdomains. For the spatial discretization, the proposed scheme is comprised of the classical central difference scheme in the first subdomain and a hybrid finite difference scheme in the second subdomain, whereas the time derivative in the given problem is discretized by the backward‐Euler method. We prove that the method converges uniformly with respect to the perturbation parameter with almost second‐order spatial accuracy in the discrete supremum norm. Numerical results are finally presented to validate the theoretical results.© 2014 Wiley Periodicals, Inc. Numer Methods Partial Differential Eq 30: 1931–1960, 2014     

A posterior error estimate for finite volume methods of the second order elliptic problem

We establish a posteriori error analysis for finite volume methods of a second‐order elliptic problem based on the framework developed by Chou and Ye [SIAM Numer Anal, 45 (2007), 1639–1653]. This residual type estimators can be applied to different finite volume methods associated with different trial functions including conforming, nonconforming and totally discontinuous trial functions. © 2010 Wiley Periodicals, Inc. Numer Methods Partial Differential Eq 27: 1165–1178, 2011     

Discontinuous finite volume element method for parabolic problems

In this article, we consider the semidiscrete and the backward Euler fully discrete discontinuous finite volume element methods for the second‐order parabolic problems and obtain the optimal order error estimates in a mesh dependent norm and in the L²‐norm. © 2009 Wiley Periodicals, Inc. Numer Methods Partial Differential Eq, 2010     

On error estimates of an exponential wave integrator sine pseudospectral method for the Klein–Gordon–Zakharov system

In this article, we propose an exponential wave integrator sine pseudospectral (EWI‐SP) method for solving the Klein–Gordon–Zakharov (KGZ) system. The numerical method is based on a Deuflhard‐type exponential wave integrator for temporal integrations and the sine pseudospectral method for spatial discretizations. The scheme is fully explicit, time reversible and very efficient due to the fast algorithm. Rigorous finite time error estimates are established for the EWI‐SP method in energy space with no CFL‐type conditions which show that the method has second order accuracy in time and spectral accuracy in space. Extensive numerical experiments and comparisons are done to confirm the theoretical studies. Numerical results suggest the EWI‐SP allows large time steps and mesh size in practical computing. © 2015 Wiley Periodicals, Inc. Numer Methods Partial Differential Eq 32: 266–291, 2016     

Exact integration formulas for the finite volume element method on simplicial meshes

This article considers the technological aspects of the finite volume element method for the numerical solution of partial differential equations on simplicial grids in two and three dimensions. We derive new classes of integration formulas for the exact integration of generic monomials of barycentric coordinates over different types of fundamental shapes corresponding to a barycentric dual mesh. These integration formulas constitute an essential component for the development of high‐order accurate finite volume element schemes. Numerical examples are presented that illustrate the validity of the technology. © 2007 Wiley Periodicals, Inc. Numer Methods Partial Differential Eq, 2007     

Existence of solution of a finite volume scheme preserving maximum principle for diffusion equations

In this article, a cell‐centered finite volume scheme preserving maximum principle for diffusion equations with scalar coefficients is developed. The construction of the scheme consists of three steps: at first the discrete normal flux is obtained by a linear combination of two single‐sided fluxes, then the tangential term of the normal flux is modified by using a nonlinear combination of two single‐sided tangential fluxes, finally the auxiliary unknowns in the tangential fluxes are calculated by the convex combinations of the cell‐centered unknowns. It is proved that this nonlinear scheme satisfies the discrete maximum principle (DMP). Moreover, the existence of a solution of the nonlinear scheme is proved by using the Brouwer's fixed point theorem and the bounded estimates. Numerical experiments are presented to show that the scheme not only satisfies DMP, but also obtains the second‐order accuracy and conservation.© 2017 Wiley Periodicals, Inc. Numer Methods Partial Differential Eq 34: 80–96, 2018     

Higher‐order finite volume element methods based on Barlow points for one‐dimensional elliptic and parabolic problems

The article is devoted to a kind of higher‐order finite volume element methods, where the dual partitions are constructed by Barlow points, for elliptic and parabolic problems in one space dimension. Techniques to derive the stability and to control the nonsymmetry are presented. Superconvergence and the optimal order errors in the H¹‐ and L²‐norms are obtained. Numerical results illustrate the theoretical findings. © 2014 Wiley Periodicals, Inc. Numer Methods Partial Differential Eq 31: 977–994, 2015