Year: 2009
International Journal of Numerical Analysis and Modeling, Vol. 6 (2009), Iss. 4 : pp. 642–658
Abstract
In this paper we apply the innovative Laplace transformation method introduced by Sheen, Sloan, and Thomée (IMA J. Numer. Anal., 2003) to solve the Black-Scholes equation. The algorithm is of arbitrary high convergence rate and naturally parallelizable. It is shown that the method is very efficient for calculating various option prices. Existence and uniqueness properties of the Laplace transformed Black-Scholes equation are analyzed. Also a transparent boundary condition associated with the Laplace transformation method is proposed. Several numerical results for various options under various situations confirm the efficiency, convergence and parallelization property of the proposed scheme.
You do not have full access to this article.
Already a Subscriber? Sign in as an individual or via your institution
Journal Article Details
Publisher Name: Global Science Press
Language: English
DOI: https://doi.org/2009-IJNAM-789
International Journal of Numerical Analysis and Modeling, Vol. 6 (2009), Iss. 4 : pp. 642–658
Published online: 2009-01
AMS Subject Headings: Global Science Press
Copyright: COPYRIGHT: © Global Science Press
Pages: 17
Keywords: Black-Scholes equation basket option Laplace inversion parallel method transparent boundary condition.