Convergence of an Exponential Euler Method for Option Pricing
نویسنده
چکیده
The aim of this paper is to analyze convergence properties of exponential integrators for linear parabolic problems arising in finance. We show convergence for the exponential Euler method for nonsmooth initial data. More precisely, we consider an example from European call options under jump diffusion model when we do not have a dense matrix. In this paper, we state and prove the main results on convergence. We show that for the exponential Euler method the order of convergence on finite time interval is one, under certain stability requirements on the method and smoothness assumptions on the analytical solution of the linear problem.
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