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Laplace Transform for the Solution of Fractional Black-Scholes Partial Differential Equation for the American Put Options with Non-Dividend Yield

Sunday Emmanuel Fadugba

Abstract



This paper presents the solution of the fractional Black-Scholes partial differential equation for the American put option with non-dividend yield using the Laplace transform. The generalized fractional Black-Scholes partial differential equation for the American option is obtained. The Laplace transform is applied to the generalized equation to obtain the price of the option. By means of the smooth pasting conditions, the free boundary of the American put option is also obtained.

Keywords


fractal transmission system, Laplace transform, non-dividend yield, smooth pasting condition.

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