FDM in Financial Engineering: Figure9.2

Cuchulainn · Posted: Thu Mar 19, 2009 7:45 am Post subject:

Centred in time can refer to both 1-step and k-step methods. So both interpretations are correct. With 1-step we only need 2 points (which makes the scheme easier to solve). Use with box scheme 9.30 to get second-order accuracy.

hope this helps.

Crank Nicolson is also the name for above approach.

hichmoul · Joined: 11 Feb 2009 Posts: 4

I think I misunderstood the term centered in time in 9.2
centered probably means between time steps n and n+1 for time

i thought it meant V(n+1) - V(n-1) ] / 2 dt

hichmoul · Joined: 11 Feb 2009 Posts: 4

I seem to have had issues with the the small text editor here

hichmoul · Joined: 11 Feb 2009 Posts: 4

Hello

is figure 9.2 applicable to the constant /time dependent factor Blackscholes PDE with IVBP (european call option) as well?as well?

Crank Nicolson is a centered scheme in time.

PWoQF Crank Nicolson chapter uses a a forward difference for time...
Is that just wrong? just wrong?

rds,