The Alternating Direction Explicit (ADE) Method for One‐Factor Problems

@inproceedings{Pealat2011TheAD,
  title={The Alternating Direction Explicit (ADE) Method for One‐Factor Problems},
  author={Guillaume Pealat and Daniel John Duffy},
  year={2011}
}
In this article we apply the ADE method to a number of partial differential equations in option pricing using one-factor models (Black–Scholes, local volatility, uncertain volatility). We first give an introduction to ADE. We discuss the stability, accuracy, and performance of ADE for a generic one-factor partial differential equation. Of particular importance is how we transform a problem on an unbounded domain to one on a bounded domain, thus avoiding complex mathematical techniques to find… CONTINUE READING
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