Author(s)

Iyakino P. Akpan^1*, Johnson O. Fatokun²

¹Department of Basic Science, College of Agriculture, Lafia, Nigeria.
²Department of Mathematical Science and Information Technology, Federal University, Dutsin-Ma, Nigeria.

In this paper the Black Scholes differential equation is transformed into a parabolic heat equation by appropriate change in variables. The transformed equation is semi-discretized by the Method of Lines (MOL). The evolving system of ordinary differential equations (ODEs) is integrated numerically by an L-stable trapezoidal-like integrator. Results show accuracy of relative maximum error of order 10^–10.

Black Scholes Equation, Partial Differential Equations (PDEs), Method of Lines (MOL), L-Stable Trapezoidal-Like Integrator

Akpan, I. and Fatokun, J. (2015) An Accurate Numerical Integrator for the Solution of Black Scholes Financial Model Equation. American Journal of Computational Mathematics, 5, 283-290. doi: 10.4236/ajcm.2015.53026.