Koh, Wei Sin (2008) Improving Modified Gauss-Seidel method for solving Black- Scholes PDE using Crank-Nicolson approach. Universiti Malaysia Sabah. (Unpublished)
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Abstract
In this study, Black-Scholes PDE is solved in the problem of valuation of European Put Option. The PDE is discretized by implicit and Crank-Nicolson schemes. Then, the option value is approximated by using Improving Modified Gauss-Seidel (IMGS) method and is compared with Modified Gauss-Seidel (MGS) method. The classical Gauss-Seidel (GS) method plays the role as the control method. The approximations are tested with grid sizes of 512,1024,2048,4096 and 8192. By numerical experiments, IMGS method is more superior in terms of number of iteration and computational time. The result is more accurate when IMGS is used with Crank- Nicolson approach.
| Item Type: | Academic Exercise |
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| Keyword: | Black-Scholes PDE, implicit, Crank-Nicolson scheme, Improving Modified Gauss-Seidel, control method |
| Subjects: | Q Science > QA Mathematics |
| Department: | SCHOOL > School of Science and Technology |
| Depositing User: | SITI AZIZAH BINTI IDRIS - |
| Date Deposited: | 25 Feb 2014 14:57 |
| Last Modified: | 12 Oct 2017 12:18 |
| URI: | https://eprints.ums.edu.my/id/eprint/8351 |
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