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An Accurate Numerical Integrator for the Solution of Black Scholes Financial Model Equation

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DOI: 10.4236/ajcm.2015.53026    4,354 Downloads   4,943 Views  

ABSTRACT

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 1010.

Conflicts of Interest

The authors declare no conflicts of interest.

Cite this paper

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.

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