|
Keywords
|
Option pricing, Generalized Black-Scholes equation, Numerical solutions, Polynomial differential quadrature method (PDQM), Runge-Kutta method.
|
|
Abstract
|
In this paper, the polynomial differential quadrature method (PDQM) is implemented to find the numerical solution of the generalized Black-Scholes partial differential equation. The PDQM reduces the problem into a system of first order non-linear differential equations and then, the obtained system is solved by optimal four-stage, order three strong stability-preserving time-stepping Runge-Kutta (SSP-RK43) scheme. Numerical examples are given to illustrate the efficiency of the proposed method.
|