Download This PaperDiffusion Equation and Monte Carlo
137 Pages Posted: 29 Apr 2011
Date Written: February 3, 2007
Abstract
Introducing the Brownian motion in the way of Einstein and Wiener we find the connection between a Wiener Process and the Heat Diffusion PDE.We solve the PDE analytically for some boundary conditions and then use the connection to the Wiener Process to solve more complex BVP’s using Monte Carlo simulations in Matlab. We connect the solutions to Black-Scholes.
Keywords: Diffusion Equation, boundary value problems, BVP, Monte Carlo, Black-Scholes
JEL Classification: G10, G13, C60, C61, P43
Suggested Citation: Suggested Citation
Österling, Anders Eskil, Diffusion Equation and Monte Carlo (February 3, 2007). Available at SSRN: https://ssrn.com/abstract=1824462 or http://dx.doi.org/10.2139/ssrn.1824462
Do you have a job opening that you would like to promote on SSRN?
Feedback
Feedback to SSRN
If you need immediate assistance, call 877-SSRNHelp (877 777 6435) in the United States, or +1 212 448 2500 outside of the United States, 8:30AM to 6:00PM U.S. Eastern, Monday - Friday.