Work

The Black‐scholes Equation Revisited: Asymptotic Expansions and Singular Perturbations

Year: 2005

Type: article

Abstract: In this paper, novel singular perturbation techniques are applied to price European, American, and barrier options. Employment of these methods leads to a significant simplification of the problem in all cases, by reducing the number of parameters. For American options, the valuation problem is reduced to a procedure that may be performed on a rudimentary handheld calculator. The method also sheds light on the evolution of option prices for all of the cases considered, the results being particularly illuminating for American and barrier options.

Source: Mathematical Finance

DOI: 10.1111/j.0960-1627.2005.00224.x

Authors: Martin Widdicks, Peter W. Duck, Ari D. Andricopoulos, David P. Newton

Institutions: University of Manchester, University of Nottingham

Language: English

Topic: Stochastic processes and financial applications

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W2140935522

FWCI: 3.985

Cites: 14

Cited by: 49

Related to: 10