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Title: Memory in the Black-Scholes model
Authors: Ferreira, J. A. 
Oliveira, P. de 
Keywords: Black-Scholes equation; Fick’s flux; Non-Fickian flux; Integro-differential equation
Issue Date: 2008
Publisher: Centro de Matemática da Universidade de Coimbra
Citation: Pré-Publicações DMUC. 08-60 (2008)
Abstract: The evolution in time of European options is usually studied using the Black-Scholes formula. This formula is obtained from the equivalence between the Black-Scholes equation and a heat equation. The solution of the last equation presents infinite speed of propagation which induces the same property for European options. In this paper we study integro-differential equations which can be used to describe the evolution of European options and which is established replacing the heat equation by a delayed heat equation.
Rights: openAccess
Appears in Collections:FCTUC Matemática - Vários

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