Analysis of a Hybrid Finite Difference Scheme for the Black-Scholes Equation Governing Option Pricing

Abstract. In this paper we present a hybrid finite difference scheme on a piecewise uniform mesh for a class of Black-Scholes equations governing option pricing which is path-dependent. In spatial discretization a hybrid finite difference scheme combining a central difference method with an upwind difference method on a piecewise uniform mesh is used. For… CONTINUE READING