AU - Ranjbar, Mojtaba
AU - Pourghanbar, Somayeh
AU - Nasrabadi, Ebrahim
TI - An Analytical Solution for the Black-Scholes Equation Using Functional Perturbation Method
PT - JOURNAL ARTICLE
TA - lu-maco
JN - lu-maco
VO - 1
VI - 1
IP - 1
4099 - http://maco.lu.ac.ir/article-1-44-en.html
4100 - http://maco.lu.ac.ir/article-1-44-en.pdf
SO - lu-maco 1
ABĀ - One of the greatest accomplishments in modern financial theory, in terms of both approach and applicability has been the BlackScholes option pricing model. It is widely recognized that the value of a European option can be obtained by solving the Black-Scholes equation. In this paper we use functional perturbation method (FPM) for solving Black-Scholes equation to price a European call option. The FPM is a tool based on considering the differential operator as a functional. The equation is expanded functionally by Frechet series. Then a number of successive partial differential equations (PDEs) are obtained that have constant coefficients and differ only in their right hand side part. Therefore we do not need to resolve the different equations for each step. In contrast to methods that have implicit solutions, the FPM yields a closed form explicit solution.
CP - IRAN
IN - Department of Mathematics, Azarbaijan shahid madani University, Tabriz, Iran
LG - eng
PB - lu-maco
PG - 65
PT - Research Article
YR - 2020