Application of the Laplace Homotopy Perturbation Method to the Black–Scholes Model Based on a European Put Option with Two Assets

Din Prathumwan and Kamonchat Trachoo
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Din Prathumwan: Department of Mathematics, Faculty of Science, Khon Kaen University, Khon Kaen 40002, Thailand
Kamonchat Trachoo: Department of Mathematics, Faculty of Science, Mahasarakham University, Mahasarakham 44150, Thailand

Mathematics, 2019, vol. 7, issue 4, 1-11

Abstract: In this paper, the Laplace homotopy perturbation method (LHPM) is applied to obtain the approximate solution of Black–Scholes partial differential equations for a European put option with two assets. Different from all other approximation methods, LHPM provides a simple way to get the explicit solution which is represented in the form of a Mellin–Ross function. The numerical examples represent that the solution from the proposed method is easy and effective.

Keywords: Black–Scholes equation; European put option; homotopy perturbation method; pricing model (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2019
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