Solutions of BSM Equation Using Fourier Transform Method


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Authors

  • Jigna V. Panchal Department of Mathematics, Indus University, Ahmedabad, India
  • A. K. Desai Department of Mathematics, Gujarat University, Ahmedabad, India

Keywords:

Black-Scholes-Merton Model, Partial Differential Equation, Call/Put option, Fourier Transform Method

Abstract

In Mathematical Finance call option is the stock market device and pricing an option is a key part. The solution of Black-Scholes-Merton (BSM) Partial Differential Equation gives the theoretical value of an option(Call/Put). It is also very useful application for online trading platform. In the present paper we have applied Fourier Transform Method to solve the equation for Log payoff function and Modified Log payoff function, which are the boundary conditions for the BSM partial differential equation. Also we have observed and shown that averages of these two payoff functions will give exactly the average of two solutions.

 

 

Author Biographies

Jigna V. Panchal, Department of Mathematics, Indus University, Ahmedabad, India

 

 

A. K. Desai, Department of Mathematics, Gujarat University, Ahmedabad, India

 

 

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Published

01-06-2016

How to Cite

Jigna V. Panchal, & A. K. Desai. (2016). Solutions of BSM Equation Using Fourier Transform Method. International Journal of Mathematics And Its Applications, 4(2 - C), 89–94. Retrieved from http://ijmaa.in/index.php/ijmaa/article/view/1048

Issue

Vol. 4 No. 2 - C (2016)

Section

Research Article

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