A Second Order L0 Stable Algorithm for Evaluating European Options

In this paper, we studythe option pricing problem,one of the prominent and challenging problems in computational finance. Using Pade approximation,we have developed a second order L0 stable discrete parallel algorithm for experimentation on advanced architectures. This algorithm is suitable for more complicated option pricing problems. For simulation purposes, we have implemented thesequential version of this algorithm and evaluated the European Options. Numerical results are compared with those obtained using othercommonly used numerical methods and shown that the new algorithm is robust and efficient than the traditional schemes. Using explicit Forward Time Centered Spaace (FTCS) on the reduced Black-Scholes partial differential equation, we report pricing of European options. We have done our experiments on a shared memory multiprocessor machine using OpenMP and report a maximum speedup of 3.43 with 16 threads.