A Finite Difference-Spectral Method for Solving the European Call Option Black–Scholes Equation

Abstract

In this paper, we present a novel technique based on backward-difference method and Galerkin spectral method for solving Black–Scholes equation. The main propose of this method is to reduce the solution of this problem to the solution of a system of algebraic equations. The convergence order of the proposed method is investigated. Also, we provide numerical experiment to show the validity of proposed method.