For others, I get everything diverging to nonsense. You will have the opportunity to study numerical methods in order to solve partial differential equations. Love coding and solving problems. Addicted to a cup of coffee in the morning and a tv series episode in the night. Black-Scholes Derivatives Greeks Options Python Quantitative Finance Risk Management Follow Sigma Quant via EmailEnter your email to follow Sigma Quant and receive notifications of new posts by email.
The model assumes the price of heavily traded assets follows a geometric Brownian motion with constant drift and volatility. I originally posted this code in Recipe 577132 and this is a repost of that recipe with corrections since there was an error in the original recipe. Added here is an error analysis to show the effectiveness of the Laplace inversion method for pricing European options. One can test the accuracy of this method to the finite difference schemes. The laplace transform of Black-Scholes PDE was taken and the result was inverted using the Talbot method for numerical inversion.
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