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- Title
OPTION PRICING WITH PADÉ APPROXIMATIONS.
- Authors
KÖROĞLU, CANAN
- Abstract
In this paper, Padé approximations are applied Black-Scholes model which reduces to heat equation. This paper shows various Padé approximaitons to obtain an effective and accurate solution to the Black-Scholes equation for a European put/call option pricing problem. At the end of the paper, results of closed-form solution of Black-Scholes problem , solution of Crank-Nicolson approach and the solution of (1; 1), (1; 2), (2; 0), (2; 1), (2; 2) Padé approximations are given at a table.
- Subjects
PADE approximant; DIFFERENTIAL equations; NUMERICAL solutions to heat equation; MATHEMATICAL models of option; MATHEMATICAL models of pricing; APPROXIMATION theory; STOCHASTIC difference equations
- Publication
Communications Series A1 Mathematics & Statistics, 2012, Vol 61, Issue 2, p45
- ISSN
1303-5991
- Publication type
Article
- DOI
10.1501/Commua1_0000000679