Using a change of time variable, reduce to the diffusion equation when c( ) 0 Consider the BlackScholes equation, when and r can be functions of time, but k 2r 2 is still a constant Reduce the BlackScholes equation to the diffusion equation in this case a2u du c(t) at ax2 ...

Answer 1 The reduced equation ...

Using a change of time variable, reduce to the diffusion equation when c( ) > 0. Consider

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Using a change of time variable, reduce

a2u du c(t)- at ax2 *

to the diffusion equation when c(τ ) > 0.
Consider the Black–Scholes equation, when σ and r can be functions of time, but k = 2r/σ² is still a constant. Reduce the Black–Scholes equation to the diffusion equation in this case.

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Introduces Quantitative Finance

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Authors: Paul Wilmott

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Using a change of time variable, reduce to the diffusion equation when c( ) > 0. Consider

Question:

a2u du c(t)- at ax2 *

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Answer 1 The reduced equation ...View the full answer

Introduces Quantitative Finance

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