Symmetries and exact solutions of a nonlinear pricing options equation

Abstract

We study the group structure of the Schönbucher–Wilmott equation with a free parameter, which models the pricing options. We find a five-dimensional group of equivalence transformations for this equation. By means of this group we find four-dimensional Lie algebras of the admitted operators of the equation in the cases of two cases of the free term and we find a three-dimensional Lie algebra for other nonequivalent specifications. For each algebra we find optimal systems of subalgebras and the corresponding invariant solutions or invariant submodels.