Solving a nonlinear PDE that prices real options using utility based pricing methods

DOI10.1016/J.NONRWA.2011.02.015MaRDI QIDQ546201zbMATH OpenOpenAlexFDO

Authors N. C. Caister, K. S. Govinder, John O'Hara

Publication date 24 June 2011

Published in Nonlinear Analysis. Real World Applications (Search for Journal in Brave)

Full work available at URL https://doi.org/10.1016/j.nonrwa.2011.02.015

zbMATH Keywords

financial mathematicsreal optionsLie symmetriesinvariant group solutionsutility pricing

Mathematics Subject Classification ID

Derivative securities (option pricing, hedging, etc.) (91G20) PDEs in connection with game theory, economics, social and behavioral sciences (35Q91) Corporate finance (dividends, real options, etc.) (91G50)

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Cites work

• scientific article; zbMATH DE number 3944162 (Why is no real title available?)
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• Fundamental solutions for zero-coupon bond pricing models
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• Lie symmetry analysis of differential equations in finance
• Lie-algebraic approach for pricing moving barrier options with time-dependent parameters
• Optimal system of Lie group invariant solutions for the Asian option PDE
• Real options with constant relative risk aversion
• Review of symbolic software for Lie symmetry analysis
• SOLVING THE ASIAN OPTION PDE USING LIE SYMMETRY METHODS
• Singular invariant equation for the \((1+1)\) Fokker-Planck equation.
• Symmetries and differential equations
• Utility based pricing and exercising of real options under geometric mean reversion and risk aversion toward idiosyncratic risk
• Valuation of financial derivatives with time-dependent parameters: Lie-algebraic approach
• Valuing the option to invest in an incomplete market

Cited in

(3)

• Solving a partial differential equation associated with the pricing of power options with time-dependent parameters
• A new tree method for pricing financial derivatives in a regime-switching mean-reverting model
• Option pricing: the reduced-form SDE model

Describes a project that uses

Uses Software

• LIE

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