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...
| Título de la revista: | ECORFAN Journal-Mexico |
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| Primer autor: | Luis Blanco Cocom |
| Otros autores: | Eric Ávila Vales; Ángel G. Estrella |
| Palabras clave: | |
| Idioma: | Inglés |
| Enlace del documento: | http://www.ecorfan.org/pdf/ECORFAN%20Journal-M%C3%A9xico%20V2%20N5_5.pdf |
| Tipo de recurso: | Documento de revista |
| Fuente: | ECORFAN Journal-Mexico; Vol 2, No 5 (Año 2011). |
| Entidad editora: | ECORFAN México |
| Organismos colaboradores: | INEDITO |
| Derechos de uso: | Sin permisos preestablecidos |
| Materias: | Ciencias Sociales y Humanidades --> Negocios |
| Resumen: | 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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