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In this chapter, we explore how the Black–Scholes model, one of the cornerstones of modern option pricing theory, can be solved numerically using finite difference methods (FDMs). Rather than relying solely on closed-form solutions, we will implement powerful numerical techniques to approximate option values by solving the Black–Scholes partial differential equation (PDE).

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Black–Scholes PDE for a European Call Option Using Finite Difference Methods

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  • 发表日期：

    2025年

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  • Aaron De La Rosa

摘要

In this chapter, we explore how the Black–Scholes model, one of the cornerstones of modern option pricing theory, can be solved numerically using finite difference methods (FDMs). Rather than relying solely on closed-form solutions, we will implement powerful numerical techniques to approximate option values by solving the Black–Scholes partial differential equation (PDE).