Exponential integral method for European option pricing

Since the official launch of domestic exchange-traded options in 2015, options have gradually become an important component of the financial market. With the diversification of option types and the expansion of market size, option pricing research has received widespread attention. In this paper, we...

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Bibliographic Details
Published inAIMS mathematics Vol. 10; no. 6; pp. 12900 - 12918
Main Authors Lu, Xun, Shi, Wei, Yang, Changhao, Yang, Fan
Format Journal Article
LanguageEnglish
Published AIMS Press 01.06.2025
Subjects
european options
exponential integral method
finite difference
option pricing
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ISSN2473-6988
2473-6988
DOI10.3934/math.2025580

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Summary:Since the official launch of domestic exchange-traded options in 2015, options have gradually become an important component of the financial market. With the diversification of option types and the expansion of market size, option pricing research has received widespread attention. In this paper, we propose a finite difference method based on exponential integrals for the pricing of European call options, based on the Black-Scholes differential equation. Through numerical analysis, this method discretizes only the price region and uses the exponential Euler method to solve the nonhomogeneous system of linear differential equations in the time direction. Numerical experiments have verified the effectiveness of this method, showing that it can stably solve option pricing problems, especially when the price is close to the exercise price, demonstrating superior numerical performance.
ISSN:2473-6988
2473-6988
DOI:10.3934/math.2025580