Group Classification of a General Bond-Option Pricing Equation of Mathematical Finance

Tanki Motsepa, Chaudry Masood Khalique and Motlatsi Molati

Abstract and Applied Analysis, 2014, vol. 2014, 1-10

Abstract:

We carry out group classification of a general bond-option pricing equation. We show that the equation admits a three-dimensional equivalence Lie algebra. We also show that some of the values of the constants which result from group classification give us well-known models in mathematics of finance such as Black-Scholes, Vasicek, and Cox-Ingersoll-Ross. For all such values of these arbitrary constants we obtain Lie point symmetries. Symmetry reductions are then obtained and group invariant solutions are constructed for some cases.

Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:hin:jnlaaa:709871

DOI: 10.1155/2014/709871

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