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A Study on the Impact of Nonlinear Source Term in Black‐Scholes Option Pricing Model

Author

Listed:
  • P. Sozhaeswari
  • R. Sowrirajan
  • K. Loganathan
  • Sonam Gyeltshen

Abstract

In this work, we study the effect of nonlinear source term in Black‐Scholes model by finding the solution of it. We use the mathematical concepts of existence and uniqueness to arrive the conclusion. The transformation of the nonlinear equation into heat equation leads to the existence of solution through fixed‐point theorems, semigroup theory, and certain regularity conditions imposed on variables.

Suggested Citation

  • P. Sozhaeswari & R. Sowrirajan & K. Loganathan & Sonam Gyeltshen, 2022. "A Study on the Impact of Nonlinear Source Term in Black‐Scholes Option Pricing Model," Abstract and Applied Analysis, John Wiley & Sons, vol. 2022(1).
    • Handle: RePEc:wly:jnlaaa:v:2022:y:2022:i:1:n:6385401
    DOI: 10.1155/2022/6385401
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    References listed on IDEAS

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    1. shu, Xiao-Bao & Shi, Yajing, 2016. "A study on the mild solution of impulsive fractional evolution equations," Applied Mathematics and Computation, Elsevier, vol. 273(C), pages 465-476.
    2. Halil Mete Soner & Guy Barles, 1998. "Option pricing with transaction costs and a nonlinear Black-Scholes equation," Finance and Stochastics, Springer, vol. 2(4), pages 369-397.
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