QuoteOriginally posted by: AlanI glanced briefly. I commend the author for showing the error at the truncated domain corner (Smax,Vmax).Most authors don't.Was the author aware of the problem? It must be pointed out that one of the boundaries in author's BC (based on Heston 1993) is degenerate, i.e. v= 0 and no BC is allowed but only if Feller condition kappa*theta >= sig^2/2. Otherwise, it's a new discussion. Any other BC are unfounded imo.Imposing BC along S = Smax and on V = Vmax will introduce a discontinuity because of the way they are chosen, yes? Or is there another reason? Heston 1993 has dC/dv = 0 on Vmax and dC/dS = 0 on Smax, so how can we ever get a smooth solution!!!! Are these BC wrong?//I see no stess testing of rho, another issue (see Sheppard's thesis that uses Soviet splitting)
Last edited by Cuchulainn
on November 3rd, 2008, 11:00 pm, edited 1 time in total.