Fadugba, S. E and Edeki, S.O. (2021) A new approach for the solution of the Black-Scholes equation with barrier option constraints. In: International Conference on Recent Trends in Applied Research, 2021, Online.
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Abstract
This paper introduces an efficient approach to solve the Black-Scholes Partial Differential Equation (BSPDE) with Barrier Option Constraints (BCOs). The approach of the Laplace –Adomian Decomposition Method (LADM), which is the combination of the Laplace Transform Method (LTM) and the Adomian Decomposition Method (ADM) is employed. The LTM is applied to the BSPDE, and the ADM is used for decomposing the solution of BSPDE into an infinite series. Moreover, the approximate solution obtained via LADM is expressed in the form of a convergent series with computed components. An illustrative example is presented, and the results are compared with the Analytical Value (AV). Hence, LADM is found to be effective and a powerful technique for obtaining an approximate solution of BSPDE with BCOs.
| Item Type: | Conference or Workshop Item (Paper) |
|---|---|
| Uncontrolled Keywords: | Adomian decomposition method, Approximate solution, Laplace transform method, Barrier option constraint, Black-Scholes equation |
| Subjects: | Q Science > QA Mathematics |
| Divisions: | Faculty of Engineering, Science and Mathematics > School of Mathematics |
| Depositing User: | Mrs Patricia Nwokealisi |
| Date Deposited: | 03 Jun 2022 12:00 |
| Last Modified: | 03 Jun 2022 12:00 |
| URI: | http://eprints.covenantuniversity.edu.ng/id/eprint/15938 |
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