Partial differential equations in option pricing

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Partial differential equations in option pricing

• Prof. Dr. Pairote Sattayatham
• Suranaree Univ. of Technology
• Feb. 25, 2010
• Chiangmai University

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1. Review of the Black Scholes theory of option
pricing

• 1.1 Market model
• one riskless asset (saving account)
• The price of other asset (the risky stock or
  stock index evolve according to the stochastic
  differential equation
• where is a constant mean return rate.

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The solution for the perpetual American put
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