Fangfang Wu, Duoduo Xu, Ming-Feng Tian, Yingying Wang
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引用次数: 0
Abstract
In this paper, an efficient lattice Boltzmann model for the generalized Black-Scholes equation governing option pricing is proposed. The Black-Scholes equation is firstly equivalently transformed into an initial value problem for a partial differential equation with a source term using the variable substitution and the derivative rules, respectively. Then, applying the multiscale Chapman-Enskog expansion, the amending function is expanded to second order to recover the convective and source terms of the macroscopic equation. The D1Q3 lattice Boltzmann model with spatial second-order accuracy is constructed, and the accuracy of the established D1Q5 model is greater than second order. The numerical simulation results demonstrate the effectiveness and numerical accuracy of the proposed models and indicate that our proposed models are suitable for solving the Black-Scholes equation. The proposed lattice Boltzmann model can also be applied to a class of partial differential equations with variable coefficients and source terms.
期刊介绍:
Advances in Mathematical Physics publishes papers that seek to understand mathematical basis of physical phenomena, and solve problems in physics via mathematical approaches. The journal welcomes submissions from mathematical physicists, theoretical physicists, and mathematicians alike.
As well as original research, Advances in Mathematical Physics also publishes focused review articles that examine the state of the art, identify emerging trends, and suggest future directions for developing fields.