The PDEs and Applications seminar: Degenerate Equations and Boundary Conditions in Finance

  • Date: –12:00
  • Location: Ångströmlaboratoriet, Lägerhyddsvägen 1 64119
  • Lecturer: Erik Ekström
  • Organiser: Matematiska institutionen
  • Contact person: Kaj Nyström
  • Seminarium

Abstract: Pricing rules in Finance are often given as expected 
values of diffusion processes. Using the Feynman-Kac theorem, this 
translates into a formulation in terms of PDEs. However, the 
equations often have degenerate coefficients at the boundary of the state 
space, and additional care is needed to establish the 
Feynman-Kac connection. We study backward and forward equations for a 
couple of problems appearing in Finance, with a special focus on boundary 
conditions.