A new computational method for approximating prices of zero-coupon bonds and bond option prices under general Chan–Karolyi–Longstaff–Schwartz models is proposed. The pricing partial differential equations are discretized using second-order finite difference approximations and an...

Many of the different numerical techniques in the partial differential equations framework for solving option pricing problems have employed only standard second-order discretization schemes. A higher-order discretization has the advantage of producing low size matrix systems for computing...