Haar wavelet transform and variational iteration method for fractional option pricing models

Comparing with the linear Black–Scholes model, fractional option pricing models are constructed by taking account some more parameters like, for example, transaction cost, so that it becomes difficult to find exact analytical solution. In this paper, we analyze a nonlinear Black and Scholes solution using novel numerical method, based on mixture of efficient techniques. particular, combine (1) Haar wavelet integration method which transforms PDEs into system algebraic equations, (2) homotopy perturbation in order linearize problem, (3) variational iteration will be used solve large equations efficiently. We also show that, comparison other popular methods, our coupling technique has higher efficiency calculation precision.