A New Nonlinear Partial Differential Equation in Finance and a Method of Its Solution

21 Pages Posted: 28 Aug 2017

Date Written: August 25, 2017

Abstract

We consider a specific type of nonlinear partial differential equation (PDE) that appears in mathematical finance as the result of solving some optimization problems. We review some examples of such problems existing in the literature and discuss the properties of these PDEs. We also demonstrate how to solve them numerically in a general case, and analytically in a particular case.

Keywords: nonlinear partial differential equation (PDE), optimization, finite-difference scheme, options, pricing

Suggested Citation

Itkin, Andrey, A New Nonlinear Partial Differential Equation in Finance and a Method of Its Solution (August 25, 2017). Journal of Computational Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3026042

Andrey Itkin (Contact Author)

New York University (NYU) ( email )

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