Uppsala University Department of Information Technology

Technical Report 2003-059

Pricing European Multi-asset Options Using a Space-time Adaptive FD-method

Jonas Persson and Lina von Sydow

December 2003


In this paper we present an adaptive technique to solve the multi-dimensional Black-Scholes equation. The number of grid-points required for a given tolerance of the local discretization errors is reduced substantially when compared to a standard equidistant grid.

Using our adaptive methods in space and time we have control of the local discretization errors and can refine the grid where needed for accuracy reasons.

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