Explicit solutions for a nonlinear model of financial derivatives

Ljudmila A. Bordag and Alina Z. Chmakova

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Abstract: Families of explicit solutions are found to a nonlinear Black-Scholes equation which incorporates the feedback-effect of a large trader in case of market illiquidity. The typical solution of these families will have a payoff which approximates a strangle. These solutions were used to test numerical schemes for solving a nonlinear Black-Scholes equation.

Date: 2006-04
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Published in International Journal of Theoretical and Applied Finance (IJTAF), 2007, v. 10, no 1, pp 1-21.

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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:math/0604117

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