Efficient Hedging in Bates Model Using High-Order Compact Finite Differences
Efficient Hedging in Bates Model Using High-Order Compact Finite Differences
We evaluate the hedging performance of a high-order compact finite difference scheme from [4] for option pricing in Bates model. We compare the scheme's hedging performance to standard finite difference methods in different examples. We observe that the new scheme outperforms a standard, second-order central finite difference approximation in all …