On a parallel time-domain method for the nonlinear Black-Scholes equation

A parallel time-domain algorithm is described for the time-dependent nonlinear Black-Scholes equation, which may be used to build financial analysis tools to help traders making rapid and systematic evaluation of buy/sell contracts. The algorithm is particularly suitable for problems that do not require fine details at each intermediate time step, and hence the method applies well for the present problem.

Numerical solutions of certain nonlinear models in European options on a distributed computing environment

Financial modelling in the area of option pricing involves the understanding of the correlations between asset and movements of buy/sell in order to reduce risk in investment. Such activities depend on financial analysis tools being available to the trader with which he can make rapid and systematic evaluation of buy/sell contracts. In turn, analysis tools rely on fast numerical algorithms for the solution of financial mathematical models. There are many different financial activities apart from shares buy/sell activities. The main aim of this chapter is to discuss a distributed algorithm for the numerical solution of a European option. Both linear and non-linear cases are considered. The algorithm is based on the concept of the Laplace transform and its numerical inverse. The scalability of the algorithm is examined. Numerical tests are used to demonstrate the effectiveness of the algorithm for financial analysis. Time dependent functions for volatility and interest rates are also discussed. Applications of the algorithm to non-linear Black-Scholes equation where the volatility and the interest rate are functions of the option value are included. Some qualitative results of the convergence behaviour of the algorithm is examined. This chapter also examines the various computational issues of the Laplace transformation method in terms of distributed computing. The idea of using a two-level temporal mesh in order to achieve distributed computation along the temporal axis is introduced. Finally, the chapter ends with some conclusions.

A distributed algorithm for European options with nonlinear volatility

A distributed algorithm is developed to solve nonlinear Black-Scholes equations in the hedging of portfolios. The algorithm is based on an approximate inverse Laplace transform and is particularly suitable for problems that do not require detailed knowledge of each intermediate time steps.

A defect equation approach for the coupling of subdomains in domain decomposition methods

A defect equation for the coupling of nonlinear subproblems defined in nonoverlapped subdomains arise in domain decomposition methods is presented. Numerical solutions of defect equations by means of quasi-Newton methods are considered.

Numerical experiments of some Krylov subspace methods for black oil model

This paper discusses preconditioned Krylov subspace methods for solving large scale linear systems that originate from oil reservoir numerical simulations. Two types of preconditioners, one being based on an incomplete LU decomposition and the other being based on iterative algorithms, are used together in a combination strategy in order to achieve an adaptive and efficient preconditioner. Numerical tests show that different Krylov subspace methods combining with appropriate preconditioners are able to achieve optimal performance.

Image denoise by fourth-order PDE based on the changes of laplacian

Fourth-order partial differential equation (PDE) proposed by You and Kaveh (You-Kaveh fourth-order PDE), which replaces the gradient operator in classical second-order nonlinear diffusion methods with a Laplacian operator, is able to avoid blocky effects often caused by second-order nonlinear PDEs. However, the equation brought forward by You and Kaveh tends to leave the processed images with isolated black and white speckles. Although You and Kaveh use median filters to filter these speckles, median filters can blur the processed images to some extent, which weakens the result of You-Kaveh fourth-order PDE. In this paper, the reason why You-Kaveh fourth-order PDE can leave the processed images with isolated black and white speckles is analyzed, and a new fourth-order PDE based on the changes of Laplacian (LC fourth-order PDE) is proposed and tested. The new fourth-order PDE preserves the advantage of You-Kaveh fourth-order PDE and avoids leaving isolated black and white speckles. Moreover, the new fourth-order PDE keeps the boundary from being blurred and preserves the nuance in the processed images, so, the processed images look very natural.