TITLE:
An Accurate Numerical Integrator for the Solution of Black Scholes Financial Model Equation
AUTHORS:
Iyakino P. Akpan, Johnson O. Fatokun
KEYWORDS:
Black Scholes Equation, Partial Differential Equations (PDEs), Method of Lines (MOL), L-Stable Trapezoidal-Like Integrator
JOURNAL NAME:
American Journal of Computational Mathematics,
Vol.5 No.3,
September
2,
2015
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 10–10.