Solution of European Call Option by the First Integral Method

M. P. Ghosh¹ , R. M. Gor²

Section:Research Paper, Product Type: Journal-Paper
Vol.6 , Issue.1 , pp.147-154, Feb-2019

CrossRef-DOI:   https://doi.org/10.26438/ijsrmss/v6i1.147154

Online published on Feb 28, 2019

Copyright © M. P. Ghosh, R. M. Gor . This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
 

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Abstract :
For finding the value of an option we use the widely used Black-Scholes formula in option pricing theory. In this paper, we convert the Black-Scholes PDE into ODE with boundary condition by using the First Integral Method and get accurate solution of Black-Scholes equation. Primarily, we address an error in a previously published work of other authors. We also show with numerical examples the effect of improved solution.

Key-Words / Index Term :
Black-Scholes equation, First integral method, European call option

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