6 research outputs found
Stability of central finite difference schemes for the Heston PDE
This paper deals with stability in the numerical solution of the prominent
Heston partial differential equation from mathematical finance. We study the
well-known central second-order finite difference discretization, which leads
to large semi-discrete systems with non-normal matrices A. By employing the
logarithmic spectral norm we prove practical, rigorous stability bounds. Our
theoretical stability results are illustrated by ample numerical experiments