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Explicit solutions for a nonlinear model of financial derivatives

Ljudmila A. Bordag·Alina Z. Chmakova
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Abstract

Families of explicit solutions are found to a nonlinear Black-Scholes equation which incorporates the feedback-effect of a large trader in case of market illiquidity. The typical solution of these families will have a payoff which approximates a strangle. These solutions were used to test numerical schemes for solving a nonlinear Black-Scholes equation.

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Ljudmila A. Bordag, Alina Z. Chmakova. 2006-04-05. Explicit solutions for a nonlinear model of financial derivatives. https://arxiv.org/abs/math/0604117

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