Finite Difference for Stock Option Simulation based on Black Scholes Models Viska Noviantri (a*), Rinda Nariswari (b), Siti Komsiyah (a)
a)Mathematics Departement
Bina Nusantara University
Jakarta 11480, Indonesia
b) Statistics Departement
Bina Nusantara University
Jakarta 11480, Indonesia
Abstract
A stock option as a derivative is a financial instrument which expected to be involved in the associated risk. Currently, options trading in Indonesia is being stopped. IDX is initiating the developments (revitalizations) of option products, in terms of infrastructure and the latest contract specifications by general practice. This study aims to provide some simulations of option price fluctuations based on stock prices. The simulation derives based on the Black Scholes Equation, which is a mathematical model that can represent the call option and put options prices of European options. This model is solved numerically using the Forward Time Center Space finite difference method. At the end of the study, it will show that the simulation results can be use to analyze the leverage parameters such as interest rates, volatility, and strike prices on option prices. Thus, if the options market reopens later, this simulation model can be used as a consideration for investors in making decisions.
Keywords: Option price, Black Scholes Model, finite difference method
