Abstract In this paper, the pricing problems of Bala options are studied under the nonlinear Black-Scholes model. Firstly, the partial differential equations for the Bala options are transformed into a series of parabolic equations with constant coefficients by the perturbation method of doubleparameter. Secondly, the approximate pricing formulae of the Bala options are given by solving those parabolic equations with constant coefficients. Finally, the error estimates of the approximate solutions are given by using Green function.
DONG Yan. The pricing of Bala options under the nonlinear Black-Scholes model. Applied Mathematics A Journal of Chinese Universities, 2016, 31(1): 9-20.
