Analysis of the Chang–Cooper discretization scheme for a class of Fokker–Planck equations

Abstract The Chang-Cooper discretization scheme for a class of Fokker-Planck equations is investigated. These equations of parabolic type govern the time evolution of the probability density function of stochastic processes, such that positivity of the density function and conservativeness of the total probability is guaranteed. It is shown that the Chang-Cooper scheme combined with backward first- and second-order finite differencing in time provides stable and accurate solutions that are conservative and positive. These properties are theoretically proven and validated by numerical experiments.