OPTION PRICING IN THE LIGHT OF ISLAMIC VISION FOR PAKISTAN STOCK EXCHANGE

Abstract

It is widely known, The Black-Scholes model is frequently used to establish the behavior of the options trading in the financial market. Throughout this paper we address the issue of Islamic Al-Arboun (the down payment) that is similar to the conventional options trading. We proposed the modified version of the 2-D time-fractional Black-Scholes partial differential c with two assets established on the combination of Finite-Volume Method for unsteady flow and numerical scheme. This work deals with the analytical solution of the European Call option based on financial derivative is so called modified Finite Volume (unsteady) options which numerically solved. Through mathematical analysis it is established that the explicit Finite-Volume scheme is unconditionally stable. After analyzing the conceptual and legal differences between the conventional and Islamic (Al-Arboun) options trading we conclude that Al-Arboun could be the shari’a compliant alternative to the European conventional Call option.