Accurate radial basis functions technique for competitive and efficient solutions of non-linear Black-Scholes equations

Vinícius Magalhães Pinto Marques, Gisele Tessari Santos, Mauri Fortes

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ABSTRACT

Objective: This article aims to solve the non-linear Black Scholes (BS) equation for European call options using Radial Basis Function (RBF) Multi-Quadratic (MQ) Method.

Methodology / Approach: This work uses the MQ RBF method applied to the solution of two complex models of nonlinear BS equation for prices of European call options with modified volatility. Linear BS models are also solved to visualize the effects of modified volatility.  Additionally, an adaptive scheme is implemented in time based on the Runge-Kutta-Fehlberg (RKF) method.


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DOI: https://doi.org/10.20397/2177-6652/2020.v20i4.2040

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Direitos autorais 2020 Revista Gestão & Tecnologia

Licença Creative Commons
Esta obra está licenciada sob uma licença Creative Commons Atribuição - NãoComercial 4.0 Internacional.