© Carlos Oliveira 2016

CARLOS OLIVEIRA, Options and Derivatives Programming in C++, 10.1007/978-1-4842-1814-3_11

11. Models Based on Differential Equations

Carlos Oliveira

(1)Monmouth Junction, New Jersey, USA

Differential equations are equations that involve in their terms both a function as well as their mathematical derivatives. Many of these equations arise naturally from the analysis of economic models used for the pricing of options, such as the Black-Scholes model .

Solving specific partial differential equations (PDEs ) is at the core of many techniques used in the analysis of options and related financial derivatives. As you will see in this chapter, there are several techniques for solving and analyzing the results of PDEs that can be ...

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