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Ali Shokri Shokri

Ali Shokri Shokri

Academic rank: Professor
ORCID:
Education: PhD.
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Faculty: 1
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Research

Title
A Nonstandard Finite Difference Method for a Generalized Black-Scholes Equation
Type
JournalPaper
Keywords
generalized Black–Scholes equation; option valuation; nonstandard finite difference; positivity
Year
2022
Journal Symmetry-Basel
DOI
Researchers Mohammad Mehdizadeh ، Mohammad Mehdi Rashidi ، Ali Shokri Shokri ، Higinio Ramos ، pari khakzad

Abstract

An implicit finite difference scheme for the numerical solution of a generalized Black– Scholes equation is presented. The method is based on the nonstandard finite difference technique. The positivity property is discussed and it is shown that the proposed method is consistent, stable and also the order of the scheme respect to the space variable is two. As the Black–Scholes model relies on symmetry of distribution and ignores the skewness of the distribution of the asset, the proposed method will be more appropriate for solving such symmetric models. In order to illustrate the efficiency of the new method, we applied it on some test examples. The obtained results confirm the theoretical behavior regarding the order of convergence. Furthermore, the numerical results are in good agreement with the exact solution and are more accurate than other existing results in the literature.