Solution of the Black-Scholes equation via the Adomian decomposition method

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  • 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.




Article ID: 871
DOI: 10.14419/ijamr.v2i4.871

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