Modeling Vanilla Option prices: A simulation study by an implicit method
Journal Title: JOURNAL OF ADVANCES IN MATHEMATICS - Year 2014, Vol 6, Issue 1
Abstract
Option contracts can be valued by using the Black-Scholes equation, a partial differential equation with initial conditions. An exact solution for European style options is known. The computation time and the error need to be minimized simultaneously. In this paper, the authors have solved the Black-Scholes equation by employing a reasonably accurate implicit method. Options with known analytic solutions have been evaluated. Furthermore, an overall second order accurate space and time discretization has been accomplished in this paper.
Authors and Affiliations
Snehanshu Saha, Swati Routh, Bidisha Goswami
Keywords
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- EP ID EP651312
- DOI 10.24297/jam.v6i1.3635
- Views 151
- Downloads 0
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