Journal of Computational Finance

SLADI: a semi-Lagrangian alternating-direction implicit method for the numerical solution of advection–diffusion problems with application to electricity storage valuations

Javier Hernández Ávalos, Paul V. Johnson and Peter W. Duck


In this paper, an efficient and novel methodology for numerically solving advection-diffusion problems is presented: a semi-Lagrangian approach for hyperbolic problems of advection is combined with an alternating-direction implicit method for parabolic problems involving diffusion. This is used to value a four-dimensional "storage option" (linked to storing electricity) involving three space variables and time. Efficiency is obtained by solving (only) tridiagonal systems of equations at every time step by incorporating the alternating-direction methodology. Extensive numerical experimentation indicates that the method is stable and accurate; three variants of the scheme are assessed and excellent numerical convergence can be observed. Further, a methodology for determining and results for optimal storage operation are

To continue reading...

You need to sign in to use this feature. If you don’t have a account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an indvidual account here: