Improved ADI Parallel Difference Method for Quanto Options Pricing Model
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@Article{IJNAM-13-569,
author = {X.-Z. Yang, F. Zhang and L.-F. Wu},
title = {Improved ADI Parallel Difference Method for Quanto Options Pricing Model},
journal = {International Journal of Numerical Analysis and Modeling},
year = {2016},
volume = {13},
number = {4},
pages = {569--586},
abstract = {The quanto options pricing model is a typical two-dimensional Black-Scholes equation
with a mixed derivative term, and it has been increasingly attracting interest over the last decade.
A kind of improved alternating direction implicit methods, which is based on the Douglas-Rachford
(D-R ADI) and Craig-Sneyd (C-S ADI) split forms, is given in this paper for solving the quanto
options pricing model. The improved ADI methods first split the original problem into two
separate one-dimensional problems, and then solve the tri-diagonal matrix equations at each
time-step. There are several advantages in this method such as: parallel property, unconditional
stability, convergency and better accuracy. The numerical experiments show that this kind of
methods is very efficient compared to the existent explicit finite difference method. In addition,
because of the natural parallel property of the improved ADI methods, the parallel computing is
very easy, and about 50% computational cost can been saved. Thus the improved ADI methods
can be used to solve the multi-asset option pricing problems effectively.},
issn = {2617-8710},
doi = {https://doi.org/},
url = {http://global-sci.org/intro/article_detail/ijnam/453.html}
}
TY - JOUR
T1 - Improved ADI Parallel Difference Method for Quanto Options Pricing Model
AU - X.-Z. Yang, F. Zhang & L.-F. Wu
JO - International Journal of Numerical Analysis and Modeling
VL - 4
SP - 569
EP - 586
PY - 2016
DA - 2016/07
SN - 13
DO - http://doi.org/
UR - https://global-sci.org/intro/article_detail/ijnam/453.html
KW - Quanto options pricing model
KW - two-dimensional Black-Scholes equation
KW - improved ADI method
KW - parallel computing
KW - numerical experiments
AB - The quanto options pricing model is a typical two-dimensional Black-Scholes equation
with a mixed derivative term, and it has been increasingly attracting interest over the last decade.
A kind of improved alternating direction implicit methods, which is based on the Douglas-Rachford
(D-R ADI) and Craig-Sneyd (C-S ADI) split forms, is given in this paper for solving the quanto
options pricing model. The improved ADI methods first split the original problem into two
separate one-dimensional problems, and then solve the tri-diagonal matrix equations at each
time-step. There are several advantages in this method such as: parallel property, unconditional
stability, convergency and better accuracy. The numerical experiments show that this kind of
methods is very efficient compared to the existent explicit finite difference method. In addition,
because of the natural parallel property of the improved ADI methods, the parallel computing is
very easy, and about 50% computational cost can been saved. Thus the improved ADI methods
can be used to solve the multi-asset option pricing problems effectively.
X.-Z. Yang, F. Zhang & L.-F. Wu. (1970). Improved ADI Parallel Difference Method for Quanto Options Pricing Model.
International Journal of Numerical Analysis and Modeling. 13 (4).
569-586.
doi:
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