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Bright O. Osu
Okechukwu U. Solomon



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Bright O. Osu
Okechukwu U. Solomon


WSEAS Transactions on Mathematics


Print ISSN: 1109-2769
E-ISSN: 2224-2880

Volume 16, 2017

Notice: As of 2014 and for the forthcoming years, the publication frequency/periodicity of WSEAS Journals is adapted to the 'continuously updated' model. What this means is that instead of being separated into issues, new papers will be added on a continuous basis, allowing a more regular flow and shorter publication times. The papers will appear in reverse order, therefore the most recent one will be on top.


Volume 16, 2017



A Stochastic Algorithm and Multiple Scale for Solution to PDE With Financial Application

AUTHORS: Bright O. Osu, Okechukwu U. Solomon

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ABSTRACT: This paper presents an application of multiple scale and stochastic approximation method to discretize generic financial PDE. The multiple scale method was adopted in calculating the periodic solution resulted from a Hopf bifurcation of a discretized generic PDE to monitor and stabilize the oscillatory movement of the market price of stock, thereafter a stochastic algorithm was formulated to price an American option under the Black-Scholes model through a drifted financial derivative system. With finer discretization, positive periodic solution, space nodes and time nodes, we demonstrate that the drifted financial derivative system can be efficiently and easily solved with high accuracy, by using a stochastic approximation method which proves to be faster in pricing an American options. An illustrative example is given in a concrete setting.

KEYWORDS: Financial PDE, Stochastic algorithm, Multiple scale, Drifted system, Option pricing, Spatial discretization

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WSEAS Transactions on Mathematics, ISSN / E-ISSN: 1109-2769 / 2224-2880, Volume 16, 2017, Art. #10, pp. 74-83


Copyright © 2017 Author(s) retain the copyright of this article. This article is published under the terms of the Creative Commons Attribution License 4.0

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