RE: FiniteDifferences framework: composition of L including S

Posted by cuchulainn on
URL: http://quantlib.414.s1.nabble.com/FiniteDifferences-framework-composition-of-L-including-S-tp3348p3349.html

Hi all,
Your schme is stable but in combination with Crank Nicolson in time it gives (bounded) spurious oscillations. This fact should be well known (see again my articles and the of others in FDM and finance).

The C++ code for the exponentially fitted scheme is on the CD of my book if you wish to use it.

Daniel

> -----Original Message-----
> From: [hidden email]
> [mailto:[hidden email]]On Behalf Of Luigi
> Ballabio
> Sent: 12 October 2004 14:29
> To: Penschke, Walter
> Cc: [hidden email]
> Subject: Re: [Quantlib-users] FiniteDifferences framework: composition
> of L including S
>
>
> On 2004.10.11 17:09, Daniel J. Duffy wrote:
> > Do you know that this centred difference scheme gives terrible
> > approximations to the delta and gamma at the strike price? See the
> > references below.
>
> Oh, and Walter: just so that you're not left outside alone,
> the calculation  
> I sketched can still be used as an example of how to discretize your  
> equation--albeit with an unstable scheme. You can follow the
> same steps  
> while using more stable differential operators instead of D0 and D+D-.
>
> Later,
> Luigi
>
>
>
>
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