Exact Forward and Put-Call Parity with TR-BDF2

7 Pages Posted: 4 Dec 2013 Last revised: 13 Jan 2014

Fabien Le Floc'h

Calypso Technology; Independent

Date Written: January 2014

Abstract

We look at how to reproduce nearly exact bond and forward contract prices with the TR-BDF2 finite difference method applied to the Black-Scholes partial differential equation, with a term structure of interest rates or a term structure of dividends yields. We also show that a careful discretion preserves the put-call parity relationship.

Keywords: Finite difference, TR-BDF2, Calibration

Suggested Citation

Le Floc'h, Fabien, Exact Forward and Put-Call Parity with TR-BDF2 (January 2014). Available at SSRN: https://ssrn.com/abstract=2362969 or http://dx.doi.org/10.2139/ssrn.2362969

Fabien Le Floc'h (Contact Author)

Calypso Technology ( email )

106 rue de la Boetie
Paris, 75008
France

Independent ( email )

France

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