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

Bertram Düring; Alexander Pitkin

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arXiv · 1710.05542

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

Bertram Düring·Alexander Pitkin

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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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Bertram Düring, Alexander Pitkin. 2017-10-16. Efficient hedging in Bates model using high-order compact finite differences. https://arxiv.org/abs/1710.05542

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