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Finite Differences

The method of choice for any engineer given a differential equation to solve is to numerically approximate it using a finite difference scheme, which is to approximate the continous differential equation with a discrete difference equation, and solve this difference equation.

In the following we implement the two schemes described in chapter 14.7 of Hull (1993), the implicit finite differences and the the explicit finite differences.


Subsections
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Next: European Options. Up: Financial Numerical Recipes. Previous: Binomial approximation, dividends.   Contents   Index
Bernt Arne Odegaard
1999-09-09