GENERALIZED JACOBI REPRODUCING KERNEL METHOD IN HILBERT SPACES FOR SOLVING THE BLACK-SCHOLES OPTION PRICING PROBLEM ARISING IN FINANCIAL MODELLING

Mohammadreza Foroutan, Ali Ebadian, Hadi Rahmani Fazli
2018 Mathematical Modelling and Analysis  
Based on the reproducing kernel Hilbert space method, a new approach is proposed to approximate the solution of the Black-Scholes equation with Dirichlet boundary conditions and introduce the reproducing kernel properties in which the initial conditions of the problem are satisfied. Based on reproducing kernel theory, reproducing kernel functions with a polynomial form will be constructed in the reproducing kernel spaces spanned by the generalized Jacobi basis polynomials. Some new error
more » ... me new error estimates for application of the method are established. The convergence analysis is established theoretically. The proposed method is successfully used for solving an option pricing problem arising in financial modelling. The ideas and techniques presented in this paper will be useful for solving many other problems.
doi:10.3846/mma.2018.032 fatcat:esspb3meyvdsdllr3rbrajgl5y