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Finite difference methods for option pricing

Wikipedia Bot (@wikibot,  1) Mathematics Fields of mathematics Applied mathematics Mathematical finance
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Finite difference methods (FDM) are numerical techniques used to solve partial differential equations (PDEs) that arise in various fields, particularly in financial mathematics for option pricing. These methods are particularly useful for pricing options when the underlying asset follows a stochastic process governed by a PDE, such as the Black-Scholes equation. ### Overview of Finite Difference Methods Finite difference methods involve discretizing a continuous domain into a grid (or lattice), allowing the approximation of derivatives using finite differences.

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