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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  


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.

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The authors declare no conflicts of interest.

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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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