Barrier Option Pricing
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Geometric theory, characteristics, transformations in context of PDEs (35A30) Heat and other parabolic equation methods for PDEs on manifolds (58J35) Invariance and symmetry properties for PDEs on manifolds (58J70) Symmetry analysis, Lie group and Lie algebra methods applied to problems in fluid mechanics (76M60)
Abstract: We use Lie symmetry methods to price certain types of barrier options. Usually Lie symmetry methods cannot be used to solve the Black-Scholes equation for options because the function defining the maturity condition for an option is not smooth. However, for barrier options, this restriction can be accommodated and a symmetry analysis utilised to find new solutions.
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