A tempered subdiffusive Black–Scholes model

In this paper, we focus on the tempered subdiffusive Black–Scholes model. The main part of our work consists of the finite difference method as a numerical approach to option pricing in the considered model. We derive the governing fractional differential equation and the related weighted numerical scheme. The proposed method has an accuracy order 2-α with respect to time, where α∈ (0,1) is the subdiffusion parameter and 2 with respect to space. Furthermore, we provide stability and convergence analysis. Finally, we present some numerical results.