Solution to the Black-Scholes equation through the Adomian decomposition method
Solution to the Black-Scholes equation through the Adomian decomposition method
The Adomian Decomposition Method (ADM) is applied to obtain a fast and reliable solution to the Black-Scholes equation with boundary condition for a European option. We cast the problem of pricing a European option with boundary conditions in terms of a diffusion partial differential equation with h...
| Journal Title: | ECORFAN Journal-Mexico |
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| First author: | Luis Blanco Cocom |
| Other Authors: | Eric Ávila Vales; Ángel G. Estrella |
| Palabras clave: | |
| Language: | English |
| Get full text: | http://www.ecorfan.org/pdf/ECORFAN%20Journal-M%C3%A9xico%20V2%20N5_5.pdf |
| Resource type: | Journal Article |
| Source: | ECORFAN Journal-Mexico; Vol 2, No 5 (Year 2011). |
| Publisher: | ECORFAN México |
| Partner agencies: | INEDITO |
| Usage rights: | Sin permisos preestablecidos |
| Categories: | Social Sciences/Humanities --> Business |
| Abstract: | The Adomian Decomposition Method (ADM) is applied to obtain a fast and reliable solution to the Black-Scholes equation with boundary condition for a European option. We cast the problem of pricing a European option with boundary conditions in terms of a diffusion partial differential equation with homogeneous boundary condition in order to apply the ADM. The analytical solution of the equations is calculated in the form of an explicit series approximation with easily computable components. |
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