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### Is stochastic control with the HJB equation used in market making/algo trading at institutions?

I would say that there are two things that we can talk about: Research purpose Real Trading Those models are a good thing to start when you try to build something that has to have characteristics of ...
• 501
1 vote

### Kou model — solving PIDE for European and American options in Python

The issue I described in my initial question is linked to the integral term. In the paper, this term is multiply by $\theta \Delta \text{t}$ but this is only the "implicit" part of the ...
• 96
1 vote

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

If I understand your questions correctly, $\xi$ is a function of $\tau$ so you need to apply chain rule. Therefore, the rate of change of $U$ wrt $\xi$ also depends on the rate of change wrt $\tau$. ...
1 vote

### What is the PDE for this interest rate derivative?

You can work out the specific PDE by applying the multi-dimensional Itô formula to the (sufficiently smooth) value function $\Pi_t = f(t, r, \sigma)$. Follow the steps from the regular Heston PDE ...
1 vote

### Any book which is intro to PDEs but prioritises techniques useful for solving Black-Scholes?

It depends on the degree of technicality you are seeking. Here are two books that might be relevant for an analysis based on Green’s function, although they are quite technical (the exposition of the ...
• 8,079
1 vote

### Any book which is intro to PDEs but prioritises techniques useful for solving Black-Scholes?

I like the book "Computational Methods for Quantitative Finance: Finite Element Methods for Derivative Pricing (Springer Verlag)" from Norbert Hilber. Very easy to read and exhaustive. The ...
• 96
1 vote
Accepted

### Trying to measure "radius of diffusion" in the stock market

Answer was given by noob2. The property can be checked by a "Variance ratio test of market efficiency" (Lo & MacKinley). Here's a nice methodology I found: https://mingze-gao.com/measures/...
• 131

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