Approximate solutions of a variable volatility driven black-scholes option pricing model

In this paper, we obtain approximate solutions of a variable-volatility option pricing model (VVOPM) built upon the classical Black-Scholes option pricing model via the inclusion of variable volatility function. Projected Differential Transform Method (PDTM) is proposed as a method of solution. For effectiveness and robustness of the proposed method, an illustrative case is considered based on some market data. The obtained results show that the solution method is very simple, efficient, and reliable even when the associated volatility function is modelled as non-constant but a function of the underlying asset price.