arXiv research

We analyze a generalized version of the Black-Scholes equation depending on a parameter $a\!\in \!(-\infty,0)$. It satisfies the martingale condition and coincides with the Black-Scholes equation in the limit case $a\nearrow 0$. We show that the generalized equation is exactly solvable in terms of Hermite polynomials a…

Neural network learns to solve Black-Scholes for stock options.

The paper proposes a different method of solving a simplified version of the Black-Scholes equation. This paper will discuss the importance of the Black-Scholes equation and its applications in finance.

Researchers found a new exact solution for pricing Aunt Michaela options using modified Black-Scholes equation.

We study a method of reducing space dimension in multi-dimensional Black-Scholes partial differential equations as well as in multi-dimensional parabolic equations. We prove that a multiplicative transformation of space variables in the Black-Scholes partial differential equation reserves the form of Black-Scholes part…

Modified perturbation method removes non-smoothness in solving Black-Scholes equations.

Using Maple, we compute some analytical solutions of a modified Black-Scholes equation, recently proposed, in the case of the European put option. We show that the modified Black-Scholes equation with the European put option is exactly solvable in terms of associated Laguerre polynomials. We make some numerical experim…

Paper solves bond option pricing with credit risk using Black-Scholes equations.

Constructs many black hole spacetimes in de Sitter space.

Black-Scholes equation, after a certain coordinate transformation, is equivalent to the heat equation. On the other hand the relativistic extension of the latter, the telegraphers equation, can be derived from the Euclidean version of the Dirac equation. Therefore the relativistic extension of the Black-Scholes model f…

Study perpetual put options using nonlinear Black-Scholes equations.

Analyzed Black's equation for risk tolerance in finance.

Three theorems about arbitrage bubbles in financial equations.

The paper extends Black-Scholes for American call options with variable volatility.

We apply Gauge Theory of Arbitrage (GTA) {hep-th/9710148} to derivative pricing. We show how the standard results of Black-Scholes analysis appear from GTA and derive correction to the Black-Scholes equation due to a virtual arbitrage and speculators reaction on it. The model accounts for both violation of the no-arbit…

Options financial instruments designed to protect investors from the stock market randomness. In 1973, Fisher Black, Myron Scholes and Robert Merton proposed a very popular option pricing method using stochastic differential equations within the Ito interpretation. Herein, we derive the Black-Scholes equation for the o…

Separates Dirac equation on 2D product spaces and black hole horizons.

Generalizes Black-Scholes model for option pricing under uncertainty.

Maxwell equations decay to Coulomb solutions on black hole spacetimes.

We determine the algebra of isovectors for the Black--Scholes equation. As a consequence, we obtain some previously unknown families of transformations on the solutions.

Motivated by the work of Segal and Segal on the Black-Scholes pricing formula in the quantum context, we study a quantum extension of the Black-Scholes equation within the context of Hudson-Parthasarathy quantum stochastic calculus. Our model includes stock markets described by quantum Brownian motion and Poisson proce…

The purpose of this paper is to construct the early exercise boundary for a class of nonlinear Black--Scholes equations with a nonlinear volatility depending on the option price. We review a method how to transform the problem into a solution of a time depending nonlinear parabolic equation defined on a fixed domain. R…

Abstract: From complex financial models to simpler Hamilton-Jacobi equations.

Derives a dual equation for various option types, leading to new pricing and hedging insights.

The purpose of this survey chapter is to present a transformation technique that can be used in analysis and numerical computation of the early exercise boundary for an American style of vanilla options that can be modelled by class of generalized Black-Scholes equations. We analyze qualitatively and quantitatively the…

We prove that, in the non-extreme Kerr-Newman black hole geometry, the Dirac equation has no normalizable, time-periodic solutions. A key tool is Chandrasekhar's separation of the Dirac equation in this geometry. A similar non-existence theorem is established in a more general class of stationary, axisymmetric metrics …

Paper links quantum processes to nonlocal diffusions and introduces a market fear factor.

In common finance literature, Black-Scholes partial differential equation of option pricing is usually derived with no-arbitrage principle. Considering an asset market, Merton applied the Hamilton-Jacobi-Bellman techniques of his continuous-time consumption-portfolio problem, deriving general equilibrium relationships …

Study proves inequality linking black hole properties and angular momentum.

Local equivalence found between Black-Scholes and Merton-Garman equations.

Learning machines can mimic the dynamics of black systems without knowing their equations.

Abstract reviews geometric wave and Dirac equations on manifolds.

Constructs solutions of Einstein equations for black holes gluing along timelike geodesics.

Gauge symmetries explain the emergence of Merton-Garman equation from Black-Scholes in finance.

Study properties of Black-Scholes equation solutions for puttable bonds with credit risk.

Modeling stochastic arbitrage bubbles in Black-Scholes framework.

In this paper we apply the innovative Laplace transformation method introduced by Sheen, Sloan, and Thomée (IMA J. Numer. Anal., 2003) to solve the Black-Scholes equation. The algorithm is of arbitrary high convergence rate and naturally parallelizable. It is shown that the method is very efficient for calculating vari…

In this paper, we investigate the non-linear Black--Scholes equation: $u_t+ax^2u_{xx}+bx^3u_{xx}^2+c(xu_x-u)=0,\quad a,b>0,\ c\geq0.$ and show that the one can be reduced to the equation $u_t+(u_{xx}+u_x)^2=0$ by an appropriate point transformation of variables. For the resulting equation, we study the group-theore…

This is the second in a series of papers in which we take a systematic study of gauge field theories such as the Maxwell equations and the Yang-Mills equations, on curved space-times. In this paper, we study the Maxwell equations in the domain of outer-communication of the Schwarzschild black hole. We show that if we a…

The purpose of this paper is to analyze and compute the early exercise boundary for a class of nonlinear Black--Scholes equations with a nonlinear volatility which can be a function of the second derivative of the option price itself. A motivation for studying the nonlinear Black--Scholes equation with a nonlinear vola…

A non-traditional approach to the discretization of differential-geometrical connections was suggested by the authors in 1997. At the same time we started studying first order difference ``black and white triangle operators (equations)'' on triangulated surfaces with a black and white coloring or triangles. In this wor…

New boundary condition for Black-Scholes equations in strict local martingale models.

The information loss occurs in an evaporating black hole only if the time evolution ends at the singularity. But as we shall see, the black hole solutions admit analytical extensions beyond the singularities, to globally hyperbolic solutions. The method used is similar to that for the apparent singularity at the event …

Stability of charged black holes in de Sitter spacetimes proven.

We study the perturbations of two classes of static black ellipsoid solutions of four dimensional vacuum Einstein equations. Such solutions are described by generic off--diagonal metrics which are generated by anholonomic transforms of diagonal metrics. The analysis is performed in the approximation of small eccentrici…

New black hole solutions found for specific conditions.

Scattering theory developed for linearised gravity near Schwarzschild black hole.

Study constructs infinite families of non-singular black hole solutions with a negative cosmological constant.