P. S. C. Yam, H. Yang, Department of Statistics and Actuarial Science, The University of Hong Kong, Pokfulam Road, Hong Kong, P.R. China, e-mails: yamscp@graduate.hku.hk, hlyang@hkusua.hku.hk
Abstract: This paper proposes a Lie group analytical approach to tackle the problem of pricing derivative securities. By exploiting the infinitesimal symmetries of the Boundary Value Problem (BVP) satisfied by the price of a derivative security, our method provides an effective algorithm for obtaining its explicit solution.
Keywords: Lie groups, infinitesimal transformations, invariants, pricing of derivative securities, Bessel equations, Bessel functions
Classification (MSC 2000): 60G40, 49L25, 91B24
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