Figure out the right hand boundary value used for option value problem

[jlperla]

Take a look at the stopping problem: http://www.princeton.edu/~moll/HACTproject/option_simple.pdf

Download http://www.princeton.edu/~moll/HACTproject/option_simple_LCP.m and http://www.princeton.edu/~moll/HACTproject/LCP.m

The goal is to figure out what the boundary value used for the right hand side of the finite difference scheme.. If the diffusion term was not there, this wouldn't be a problem since it uses the backward differences as upwind. But with the 2nd order term we need something else for the final point?

[jlperla]

You can also see https://ecommons.cornell.edu/bitstream/handle/1813/5453/2003-279.pdf?sequence=1&isAllowed=y

[jlperla]

Looking at that code, the key is to understand the construction of the A matrix. In particular,

A =spdiags(Y,0,I,I)+spdiags(X(2:I),-1,I,I)+spdiags([0;Z(1:I-1)],1,I,I);
A(I,I)= Y(I) + sig2(I)/(2*dx2);
A(I,I-1) = X(I);

[jlperla]

Take a look at http://www.princeton.edu/~moll/Lecture1_Rochester.pdf and http://www.princeton.edu/~moll/Lecture2_Rochester.pdf

[jlperla]

I think you finished this, so closing the issue.