An Eulerian-Lagrangian method for option pricing in finance

Wang Zheng, Mohamed Al-Lawatia, Wang Hong*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review


This article is devoted to the development and application of an Eulerian-Lagrangian method (ELM) for the solution of the Black-Scholes partial differential equation for the valuation of European option contracts. This method fully utilizes the transient behavior of the governing equations and generates very accurate option's fair values and their derivatives also known as option Greeks, even if coarse spatial grids and large time steps are used. Numerical experiments on two standard option contracts are presented which show that the ELM method (favorably) compares in terms of accuracy and efficiency to many other well-perceived methods.

Original languageEnglish
Pages (from-to)293-329
Number of pages37
JournalNumerical Methods for Partial Differential Equations
Issue number2
Publication statusPublished - Mar 2007


  • Black-Scholes equations
  • Efficient simulation of option pricing
  • Eulerian-Lagrangian methods
  • Financial mathematics
  • Mathematical finance
  • Option-pricing

ASJC Scopus subject areas

  • Analysis
  • Numerical Analysis
  • Computational Mathematics
  • Applied Mathematics


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