Analytical Solution of Fractional BSM Differential Equation for ML-Payoff Function Using GDTM


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Authors

  • S J Ghevariya Department of Mathematics, Sardar Patel University, Vallabh Vidyanagar, Gujarat, India

Keywords:

BSM differential equation, Fractional derivative, Generalized Differential Transform Method, ML-Payoff functions

Abstract

This paper contributes to the analytical solution of fractional Black-Scholes-Merton (BSM) differential equation to obtain European option pricing formula for Modified Log-payoff (ML-Payoff) function, $\max\{S\ln\big(\frac{S}{K}\big),0\}$ using Generalized Differential Transform Method (GDTM). It turns out that the BSM formula for ML-Payoff function using GDTM is quite close to the closed form solution of BSM model for ML-Payoff function.

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Published

15-09-2019

How to Cite

S J Ghevariya. (2019). Analytical Solution of Fractional BSM Differential Equation for ML-Payoff Function Using GDTM. International Journal of Mathematics And Its Applications, 7(3), 23–27. Retrieved from http://ijmaa.in/index.php/ijmaa/article/view/225

Issue

Vol. 7 No. 3 (2019)

Section

Research Article

License

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.