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, issue 1

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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https://doi.org/10.1155/2014/709871

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Persistent link: https://EconPapers.repec.org/RePEc:wly:jnlaaa:v:2014:y:2014:i:1:n:709871

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