Quarter-sweep improving Modified Gauss-Seidel Method for Pricing European Option
The aim of this paper is to examine the application of the Quarter-Sweep Improving Modified Gauss-Seidel (QSIMGS) method in evaluating European option which governed by Black-Scholes partial differential equation (PDE). Quarter-sweep Crank-Nicolson approach is applied to approximate the PDE. Then, the...
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| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
| Published: |
Penerbit UTM Press
2010
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| Subjects: | |
| Online Access: | https://eprints.ums.edu.my/id/eprint/21430/1/Quarter%20Sweep%20Improving%20Modified%20Gauss.pdf https://eprints.ums.edu.my/id/eprint/21430/ |
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| Summary: | The aim of this paper is to examine the application of the Quarter-Sweep Improving Modified Gauss-Seidel (QSIMGS) method in evaluating European option which governed by Black-Scholes partial differential equation (PDE). Quarter-sweep Crank-Nicolson approach is applied to approximate the PDE. Then, the generated linear system is solved by using the IMGS method. Some numerical experiments for a family of Gauss-Seidel (GS) methods such as Gauss-Seidel, Modified GaussSeidel (MGS) and Improving Modified Gauss-Seidel (IMGS) methods are performed with each full-, half-, and quarter-sweep iterations. Thus, from the numerical results obtained, we can show that the QSIMGS method is the most effective method |
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