Cover Image

Exact solution of a generalized version of the Black-Scholes equation

We analyze a generalized version of the Black-Scholes equation depending on a parameter $a\!\in \!(-\infty,0)$. It satisfies the martingale condition and coincides with the Black-Scholes equation in the limit case $a\nearrow 0$. We show that the generalized equation is exactly solvable in terms of Hermite polynomials and numerically compare its solution with the solution of the Black-Scholes equation.
Year of publication:
2014-11
Authors: Cotfas, Liviu-Adrian ; Delcea, Camelia ; Cotfas, Nicolae
Institutions: arXiv.org
Extent:
application/pdf
Series:
Type of publication: Book / Working Paper
Source:
Persistent link: https://www.econbiz.de/10010960628
Similar items by person