Convergence rates of moving mesh methods for moving boundary partial integro-differential equations from regime-switching jump-diffusion Asian option pricing

JOURNAL OF COMPUTATIONAL AND APPLIED MATHEMATICS

卷:370

Article

Ma, Jingtang¹  Wang, Han¹ 

[1] Southwestern Univ Finance & Econ, Sch Econ Math, Chengdu 611130, Peoples R China

关键词: Partial integro-differential equations;    Moving boundary problems;    Asian option pricing;    Regime-switching jump diffusion models;    Moving mesh methods;    Convergence rates;   

DOI  :  10.1016/j.cam.2019.112598

来源: Elsevier

【 摘 要 】

This paper studies the convergence rates of moving mesh methods for a system of moving boundary partial integro-differential equations (PIDEs) which arise in the Asian option pricing under the state-dependent regime-switching jump-diffusion models. The value function of the Asian option under the model is governed by a system of two-dimensional PIDEs. In this paper, the two-dimensional PIDEs are recast into a one-dimensional moving boundary problem of the PIDEs. A moving finite difference method (FDM) is proposed to solve the one-dimensional moving boundary problem and the convergence rates are proved. Numerical examples are provided to confirm the theoretical results. (C) 2019 Elsevier B.V. All rights reserved.

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