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

See all articles by Chi-Fai Lo

Chi-Fai Lo

The Chinese University of Hong Kong

Cho-Hoi Hui

Hong Kong Monetary Authority - Research Department

Abstract

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

Suggested Citation

Lo, Chi-Fai and Hui, Cho-Hoi, 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. Available at SSRN: https://ssrn.com/abstract=1007158

Chi-Fai Lo (Contact Author)

The Chinese University of Hong Kong ( email )

Department of Physics
Shatin, N.T., Hong Kong
China

Cho-Hoi Hui

Hong Kong Monetary Authority - Research Department ( email )

Hong Kong
China

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