easy · Quantitative Finance numerical
A finite-difference explicit scheme is used to solve the Black-Scholes PDE. At a specific price node i=50 and time step n+1, the option values are V_49^n+1 = 4.0, V_50^n+1 = 4.5, and V_51^n+1 = 5.1.
If the discretized coefficients are a_i = 0.45, b_i = 0.05, and c_i = 0.50, what is the value V_50^n at the previous time step?
- 4.500
- 5.025
- 4.533
- 4.575
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