Lattice Boltzmann Method for the Generalized Black-Scholes Equation
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...
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| Main Authors: | , , , |
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| Format: | Article |
| Language: | English |
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Wiley
2023-01-01
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| Series: | Advances in Mathematical Physics |
| Online Access: | http://dx.doi.org/10.1155/2023/1812518 |
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| _version_ | 1849473491133267968 |
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| author | Fangfang Wu Duoduo Xu Ming Tian Yingying Wang |
| author_facet | Fangfang Wu Duoduo Xu Ming Tian Yingying Wang |
| author_sort | Fangfang Wu |
| collection | DOAJ |
| description | 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. |
| format | Article |
| id | doaj-art-d3098eeb3f4c4cbb8d9a32f003c2ff62 |
| institution | Kabale University |
| issn | 1687-9139 |
| language | English |
| publishDate | 2023-01-01 |
| publisher | Wiley |
| record_format | Article |
| series | Advances in Mathematical Physics |
| spelling | doaj-art-d3098eeb3f4c4cbb8d9a32f003c2ff622025-08-20T03:24:07ZengWileyAdvances in Mathematical Physics1687-91392023-01-01202310.1155/2023/1812518Lattice Boltzmann Method for the Generalized Black-Scholes EquationFangfang Wu0Duoduo Xu1Ming Tian2Yingying Wang3College of ScienceCollege of ScienceCollege of ScienceCollege of ScienceIn 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.http://dx.doi.org/10.1155/2023/1812518 |
| spellingShingle | Fangfang Wu Duoduo Xu Ming Tian Yingying Wang Lattice Boltzmann Method for the Generalized Black-Scholes Equation Advances in Mathematical Physics |
| title | Lattice Boltzmann Method for the Generalized Black-Scholes Equation |
| title_full | Lattice Boltzmann Method for the Generalized Black-Scholes Equation |
| title_fullStr | Lattice Boltzmann Method for the Generalized Black-Scholes Equation |
| title_full_unstemmed | Lattice Boltzmann Method for the Generalized Black-Scholes Equation |
| title_short | Lattice Boltzmann Method for the Generalized Black-Scholes Equation |
| title_sort | lattice boltzmann method for the generalized black scholes equation |
| url | http://dx.doi.org/10.1155/2023/1812518 |
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