Symmetry reductions of some non-linear 1+1 D and 2+1 D black-scholes models

Abstract

In this dissertation, we consider a number of modi ed Black-Scholes equations being either non-linear or given in higher dimensions. In particular we focus on the non-linear Black-Scholes equation describing option pricing with hedging strategies in one case, and two dimensional models in the other. Classical Lie point symmetry techniques are employed in an attempt to construct exact solutions. Some large symmetry algebras are admitted. We proceeded by determining the one dimensional optimal systems of sub-algebras for the admitted Lie algebras. The elements of the optimal systems are used to reduce the number of variables by one. In some cases, exact solutions are constructed. For the cases for which exact solutions are di cult to construct, we employed the numerical solutions. Some simulations are observed and interpreted