Solution of the Fractional Black-Scholes Option Pricing Model by Finite Difference Method

By Lina Song, Weiguo Wang. 2013

107 citations recorded by the source corpus.

This work deals with the put option pricing problems based on the time-fractional Black-Scholes equation, where the fractional derivative is a so-called modified Riemann-Liouville fractional derivative. With the aid of symbolic calculation software, European and American put option pricing models that combine the time-fractional Black-Scholes equation with the conditions satisfied by the standard put options are numerically solved using the implicit scheme of the finite difference method.

Subfields: Applied Mathematics, Finance, Modeling and Simulation

View Paper: https://www.semanticscholar.org/paper/b06eb2174e6dc27600fe7f21ae4b774f1ee22320

Citations in the corpus

• Numerical solution of time-fractional Black–Scholes equation (2016, unknown): “The usual transform t = T − τ is used in Song and Wang (2013) to transform the timefractional derivative in (2) and to construct an adequate numerical method, but a mistake is committed in the differential operator after time inversion change.”