Analytic solution of a nonlinear Black-Scholes equation

dc.contributor.author	Esekon, Joseph E
dc.date.accessioned	2016-09-28T16:41:34Z
dc.date.available	2016-09-28T16:41:34Z
dc.date.issued	2016
dc.identifier.uri	http://hdl.handle.net/123456789/112
dc.identifier.uri	https://www.researchgate.net/publication/266860093_Analytic_solution_of_a_nonlinear_Black-Scholes_equation
dc.description.abstract	We study a nonlinear Black-Scholes partial differential equation whose nonlinearity is as a result of transaction costs that lead to market illiq- uidity. After reducing the equation into a nonlinear parabolic porous medium type equation, we find that the assumption of a traveling wave profile to the porous medium type equation reduces it further to ordinary differential equa- tions. Solutions to all these transformed equations together with the use of localizing boundary conditions facilitate a twice continuously differentiable so- lution to the nonlinear Black-Scholes equation. We also find that the option is always more volatile compared to the stock. All the risk parameters except Gamma are negative throughout time t.	en_US
dc.title	Analytic solution of a nonlinear Black-Scholes equation	en_US