A Finite Difference-Spectral Method for Solving the European Call Option Black–Scholes Equation | Zendy

Y. Talaei | Zendy; Hasan Hosseinzadeh | Zendy; Samad Noeiaghdam | Zendy

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A Finite Difference-Spectral Method for Solving the European Call Option Black–Scholes Equation

Author(s) -

Y. Talaei,

Hasan Hosseinzadeh,

Samad Noeiaghdam

Publication year - 2021

Publication title -

mathematical modelling and engineering problems

Language(s) - English

Resource type - Journals

eISSN - 2369-0747

pISSN - 2369-0739

DOI - 10.18280/mmep.080215

Subject(s) - black–scholes model , algebraic equation , mathematics , convergence (economics) , galerkin method , spectral method , finite difference method , order (exchange) , algebraic number , finite difference , mathematical optimization , mathematical analysis , finite element method , finance , econometrics , physics , volatility (finance) , nonlinear system , quantum mechanics , economics , thermodynamics , economic growth

In this paper, we present a novel technique based on backward-difference method and Galerkin spectral method for solving Black–Scholes equation. The main propose of this method is to reduce the solution of this problem to the solution of a system of algebraic equations. The convergence order of the proposed method is investigated. Also, we provide numerical experiment to show the validity of proposed method.

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