B-spline Collocation Approach to the Solution of Options PricingModel
نویسندگان
چکیده
In this paper, we construct a numerical method to the solution of the Black-Scholes partial differential equation modeling the European option pricing problem with regard to a single asset. We use an explicit spline-difference scheme which is based on using a finite difference approximation for the temporal derivative and a cubic B-spline collocation for spatial derivatives. The derived method leads to a tri-diagonal linear system. The stability of this method has been discussed and shown to be unconditionally stable. The computational performance of the proposed scheme is compared with those obtained by using a scheme based on the radial basis function.
منابع مشابه
A new approach to using the cubic B-spline functions to solve the Black-Scholes equation
Nowadays, options are common financial derivatives. For this reason, by increase of applications for these financial derivatives, the problem of options pricing is one of the most important economic issues. With the development of stochastic models, the need for randomly computational methods caused the generation of a new field called financial engineering. In the financial engineering the pre...
متن کاملB-SPLINE COLLOCATION APPROACH FOR SOLUTION OF KLEIN-GORDON EQUATION
We develope a numerical method based on B-spline collocation method to solve linear Klein-Gordon equation. The proposed scheme is unconditionally stable. The results of numerical experiments have been compared with the exact solution to show the efficiency of the method computationally. Easy and economical implementation is the strength of this approach.
متن کاملAn ${cal O}(h^{8})$ optimal B-spline collocation for solving higher order boundary value problems
As we know the approximation solution of seventh order two points boundary value problems based on B-spline of degree eight has only ${cal O}(h^{2})$ accuracy and this approximation is non-optimal. In this work, we obtain an optimal spline collocation method for solving the general nonlinear seventh order two points boundary value problems. The ${cal O}(h^{8})$ convergence analysis, mainly base...
متن کاملNumerical studies of non-local hyperbolic partial differential equations using collocation methods
The non-local hyperbolic partial differential equations have many applications in sciences and engineering. A collocation finite element approach based on exponential cubic B-spline and quintic B-spline are presented for the numerical solution of the wave equation subject to nonlocal boundary condition. Von Neumann stability analysis is used to analyze the proposed methods. The efficiency, accu...
متن کاملGeneralized B-spline functions method for solving optimal control problems
In this paper we introduce a numerical approach that solves optimal control problems (OCPs) using collocation methods. This approach is based upon B-spline functions. The derivative matrices between any two families of B-spline functions are utilized to reduce the solution of OCPs to the solution of nonlinear optimization problems. Numerical experiments confirm our heoretical findings.
متن کامل