Two high-order compact difference schemes with temporal graded meshes for time-fractional Black-Scholes equation

Abstract

In this paper, two high-order compact difference schemes with graded meshes are proposed for solving the time-fractional Black-Scholes equation. We first eliminate the convection term in the equivalent form of the considered equation by using exponential transformation, then combine the sixth-order/eighth-order compact difference method with a temporal graded meshes-based trapezoidal formulation for the temporal integral term to obtain the fully discrete high-order compact difference schemes. The stability and convergence analysis of the two proposed schemes are studied by applying Fourier analysis. Finally, the effectiveness of the proposed schemes and the correctness of the theoretical results are verified by two numerical examples.