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Vol.1 , No. 3, Publication Date: Aug. 9, 2014, Page: 38-42
| [1] | Bright O. Osu, Department of Mathematics, Abia State University, Uturu, Nigeria. |
| [2] | Angela I. Chukwunezu, Department of Mathematics Federal Polytechnic, Nekede, Owerri, Nigeria. |
The purpose of this paper is to obtain a solution for a fractional Black- Scholes formula for the price of an option for every tϵ[0,T]. For this purpose, we first derive the Black- Scholes equation for a generic pay-off function whose value is equivalently the worth of the stock at time t. We further obtain the equilibrium price and growth rate of the stock that is priced in the market. An analysis of the stability and convergence of the solution is given in concrete setting.
Keywords
Option Pricing, Fractional Black-Scholes Model, Growth Rate, Convergence to Solution
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