On Valuation of Derivative Securities: A Lie Group Analytical Approach |
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| Authors: | Phillip S C Yam Hailiang Yang |
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| Institution: | (1) Department of Statistics and Actuarial Science, The University of Hong Kong, Pokfulam Road, Hong Kong, P.R. China |
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| Abstract: | This paper proposes a Lie group analytical approach to tackle the problem of pricing derivative securities. By exploiting
the infinitesimal symmetries of the Boundary Value Problem (BVP) satisfied by the price of a derivative security, our method
provides an effective algorithm for obtaining its explicit solution.
This work was supported by Research Grants Council of HKSAR (Project No. HKU 7239/04H) and the Small Project Funding Programme
of HKU. |
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| Keywords: | Lie groups infinitesimal transformations invariants pricing of derivative securities Bessel equations Bessel functions |
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