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Publication Detailed Description
Generalized exponential basis for efficient solving of homogeneous diffusion free boundary problems: Russian option pricing
Journal Title
Journal of Mathematical Sciences
Year (definitive publication)
2022
Language
English
Country
United States of America
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Abstract
This paper develops a method for solving free boundary problems for time-homogeneous diffusions. We combine the complete exponential system of solutions for the heat equation, transmutation operators and recently discovered Neumann series of Bessel functions representation for solutions of Sturm-Liouville equations to construct a complete system of solutions for the considered partial differential equations. The conceptual algorithm for the application of the method is presented. The valuation of Russian options with finite horizon is used as a numerical illustration. The solution under different horizons is computed and compared to the results that appear in the literature.
Acknowledgements
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Keywords
Free boundary problems,Transmutation operators,Neumann series of Bessel functions,Russian options
Fields of Science and Technology Classification
- Mathematics - Natural Sciences
Funding Records
| Funding Reference | Funding Entity |
|---|---|
| UIDB/00315/2020 | Fundação para a Ciência e a Tecnologia |
| 075–02–2022–893 | Centro de Investigación y de Estudios Avanzados del Instituto Politécnico Naciona |
| 284470 | Consejo Nacional de Ciencia y Tecnología |
| 222478 | Consejo Nacional de Ciencia y Tecnología |
