International Journal of Computing Science and Applied Mathematics
Vol 7, No 2 (2021)

Digital Option Pricing Approach Using A Homotopy Perturbation Method

Amirul Hakam (Institut Teknologi Sepuluh Nopember)
Islachiyatul Ummah (Institut Teknologi Sepuluh Nopember)
Frida Akbar Rani (Institut Teknologi Sepuluh Nopember)
Nur Asiyah (Institut Teknologi Sepuluh Nopember)
Endah RM Putri (Institut Teknologi Sepuluh Nopember)

Article Info

Publish Date
17 Aug 2021

Abstract

An option is a financial contract between buyers and sellers. The Black-Scholes equation is the most popular mathematical equation used to analyze the option pricing. The exact solution of the Black-Scholes equation can be approached by several approximation methods, one of the method is a Homotopy Perturbation Method (HPM). The simplest type of option, digital options were analyzed using the HPM. The digital option pricing approach using the HPM is in a power series form, which in this paper is presented the solution in the fourth power. This solution is compared with the exact solution of the Black-Scholes equation for digital options. The results show that the approach using HPM is very accurate.

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Journal Info
International Journal of Computing Science and Applied Mathematics
Website

Abbrev

ijcsam

Publisher

Institut Teknologi Sepuluh Nopember Surabaya

Subject

Computer Science & IT Education Mathematics

Description

(IJCSAM) International Journal of Computing Science and Applied Mathematics is an open access journal publishing advanced results in the fields of computations, science and applied mathematics, as mentioned explicitly in the scope of the journal. The journal is geared towards dissemination of ...