Abstract:
The objective of the study is to obtain the Black-Scholes solution by transforming
the Black-Scholes equation using heat equation and the usage of the solution to
obtain the option price. The Black-Scholes equation will be transformed into the
heat equation, and then use the heat fundamental equation to find the Black-Scholes
solution. The Black-Scholes solution that were obtained will be used to find the
theoretical price of the Black-Scholes European call and put option. This thesis uses
the Research and Development method, that is a research approach that calls for the
use of numbers throughout the research process, from data collection to data
interpretation and result presentation.
