# Questions tagged [black-scholes-pde]

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### When to use total derivative and when not to?

as I was trying to teach myself financial mathematics, I came across this topic on transforming black scholes pde to a heat equation. I had the exat same question as this post Black Scholes to Heat ...
155 views

### Black Scholes PDE explicit Scheme

I am currently working on the implementation of classic schemes to solve the BS PDE and it seems that I make a mistake in my code because the result looks far from the result of the BS formula. Here ...
165 views

### What are the parallels between the Black-Scholes equation and the heat equation?

I'm trying to understand the analogy between the Black-Scholes equation (1) and the heat partial differential equation (2). I understand that (1) can be written in the form of (2) mathematically, but ...
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### Why does Black Scholes formula give inconsistent dimensional analysis result?

For example, distance = speed * time, m = m/s * s. But this technique gives wrong answer on the Black Scholes formula. The square root in the denominator gives wrong unit inside of the culumulative ... 1 vote
726 views

### Pricing Knock Out Barrier Options by solving Black Scholes PDE (MATLAB)

This question is based on MATLAB functions. Suppose there is a stock S following the process $dS_t=(r-q)S_tdt+\sigma(S_t,t)dW_t$ r - risk-free rate, q - dividend yield, W - Weiner process The ...
716 views

### Black-Scholes equation to Heat equation .(Boundary conditions)

I have been given a problem to code the heat equation which is transformed from B-S equation (European call option) . Now the boundary conditions are for European call option: $$C(S,T)=\max(S-K,0)$$...
446 views

### Errors on Finite Differences + Implicit Scheme + Black & Scholes

I'm solving the classical Black & Scholes (BS) PDE for a European option using finite difference and the implicit scheme. In other words, I'm trying to solve \$\displaystyle\frac{\partial V}{\...