Lie Symmetry Analysis of a First-Order Feedback Model of Option Pricing
A first-order feedback model of option pricing consisting of a coupled system of two PDEs, a nonliner generalised Black-Scholes equation and the classical Black-Scholes equation, is studied using Lie symmetry analysis. This model arises as an extension of the classical Black-Scholes model when liqui...
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| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
Wiley
2015-01-01
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| Series: | Advances in Mathematical Physics |
| Online Access: | http://dx.doi.org/10.1155/2015/361785 |
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| Summary: | A first-order feedback model of option pricing consisting of a coupled system of two PDEs, a nonliner generalised Black-Scholes equation and the classical Black-Scholes equation, is studied using Lie symmetry analysis. This model arises as an extension of the classical Black-Scholes model when liquidity is incorporated into the market. We compute the admitted Lie point symmetries of the system and construct an optimal system of the associated one-dimensional subalgebras. We also construct some invariant solutions of the model. |
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| ISSN: | 1687-9120 1687-9139 |