Pricing Multi-Asset Financial Derivatives With Time-Dependent Parameters - Lie Algebraic Approach
International Journal of Mathematics and Mathematical Sciences, Vol. 32, No. 7, pp. 401-410, 2002
13 Pages Posted: 27 Aug 2007
In this paper we present a Lie-algebraic technique for the valuation of multi-asset financial derivatives with time-dependent parameters. By exploiting the dynamical symmetry of the pricing partial differential equations of the financial derivatives, the new method enables us to derive analytical closed-form pricing formulae very straightforwardly. We believe that this new approach will provide an efficient and easy-to-use method for the valuation of financial derivatives.
Keywords: Option pricing, Lie algebraic approach, Time-dependent parameters
JEL Classification: C60, G13
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