Journal
COMPUTERS & MATHEMATICS WITH APPLICATIONS
Volume 74, Issue 6, Pages 1166-1175Publisher
PERGAMON-ELSEVIER SCIENCE LTD
DOI: 10.1016/j.camwa.2017.06.005
Keywords
Fractional differential equation; Numerical scheme; Double barrier option; Black-Scholes; Convergence; Stability
Categories
Funding
- Research Foundation-Flanders [FW015/PD0/076]
- Russian Science Foundation [14-410 35-00005]
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The numerical solution of the time fractional Black-Scholes model (TFBSM) of order 0 < alpha < 1 governing European options is studied. Zhang et al. (2016) derived a numerical scheme of second-order in space. We improve their results by constructing a scheme of fourth-order in space while keeping 2 a in time. The solvability, stability and convergence of the proposed numerical scheme are proved using a Fourier analysis. The results are demonstrated on two examples. (C) 2017 Elsevier Ltd. All rights reserved.
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