Efficient hedging in Bates model using high-order compact finite differences

2017/10/16 by Düring, Bertram, Pitkin, Alexander
#35Q91 #65M06 #91G20 #Computational Finance (q-fin.CP) #FOS: Economics and business

paper · doi:10.48550/arxiv.1710.05542

Abstract

We evaluate the hedging performance of a high-order compact finite difference scheme from [4] for option pricing in Bates model. We compare the scheme's hedging performance to standard finite difference methods in different examples. We observe that the new scheme outperforms a standard, second-order central finite difference approximation in all our experiments.

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