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No error from finite difference approximation
Hi there,Acoording to the papaer below, we could obtain the exact price by the explicit finite difference with the replacement below. Is it mathematically true? Namely, is the price without error? If so, why? Thanks in advance,q(z,t) = P(0) * exp(-v*z) * cosh( v*sqrt(dt))^(-t/dt)Jamshidian, F. (1989), The multifactor Gaussian Interest rate Model and implementationJamshidian, F. (1991), Bond and option evaluation in the Gaussian interest rate model