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Solving a nonlinear pde that prices real options using utility based pricing methods

Caister, NC and Govinder, KS and O'Hara, JG (2011) 'Solving a nonlinear pde that prices real options using utility based pricing methods.' Nonlinear Analysis: Real World Applications, 12 (4). 2408 - 2415. ISSN 1468-1218

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Abstract

We provide group invariant solutions to two nonlinear differential equations associated with the valuing of real options with utility pricing theory. We achieve these through the use of the Lie theory of continuous groups, namely, the classical Lie point symmetries. These group invariant solutions, constructed through the use of the symmetries that also leave the boundary conditions invariant, are consistent with the results in the literature. Thus it may be shown that Lie symmetry algorithms underlie many ad hoc methods that are utilised to solve differential equations in finance. © 2011 Elsevier Ltd. All rights reserved.

Item Type: Article
Subjects: H Social Sciences > HG Finance
Q Science > QA Mathematics
Divisions: Faculty of Science and Health > Computer Science and Electronic Engineering, School of
Depositing User: Jim Jamieson
Date Deposited: 01 Feb 2013 15:52
Last Modified: 05 Feb 2019 03:15
URI: http://repository.essex.ac.uk/id/eprint/5438

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