Title of article :
Quarter-Sweep Improving Modified Gauss-Seidel Method for Pricing European Option
Author/Authors :
Koh, W. S. Universiti Malaysia Sabah - School of Science and Technology, Malaysia , Sulaiman, J. Universiti Malaysia Sabah - School of Science and Technology, Malaysia , Mail, R. Universiti Malaysia - School of Business and Economics, Malaysia
Abstract :
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 Gauss- Seidel (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.
Keywords :
Quarter , Sweep Improving Modified Gauss , Seidel method , Black , Scholes PDE , Crank , Nicolson scheme
Journal title :
Matematika
Journal title :
Matematika
