Finite difference method

Abstract: Recently, many new applications in engineering and science are governed by a series of fractional partial differential equations (FPDEs). Unlike the normal partial differential equations (PDEs), the differential order in a FPDE is with a fractional order, which will lead to new challenges for numerical simulation, because most existing numerical simulation techniques are developed for the PDE with an integer differential order. The current dominant numerical method for FPDEs is Finite Difference Method (FDM), which is usually difficult to handle a complex problem domain, and also hard to use irregular nodal distribution. This paper aims to develop an implicit meshless approach based on the moving least squares (MLS) approximation for numerical simulation of fractional advection-diffusion equations (FADE), which is a typical FPDE. The discrete system of equations is obtained by using the MLS meshless shape functions and the meshless strong-forms. The stability and convergence related to the time discretization of this approach are then discussed and theoretically proven. Several numerical examples with different problem domains and different nodal distributions are used to validate and investigate accuracy and efficiency of the newly developed meshless formulation. It is concluded that the present meshless formulation is very effective for the modeling and simulation of the FADE.

Abstract: We study the applicability of meshfree approximation schemes for the solution of multi‐asset American option problems. In particular, we consider a penalty method which allows us to remove the free and moving boundary by adding a small and continuous penalty term to the Black‐Scholes equation. Time discretization is achieved by a linearly implicit θ method. A comparison with results obtained recently by two of the authors using a linearly implicit finite difference method is included.