Explicit solutions for a nonlinear model of financial derivatives
arXiv:math/0604117
Abstract
Families of explicit solutions are found to a nonlinear Black-Scholes equation which incorporates the feedback-effect of a large trader in case of market illiquidity. The typical solution of these families will have a payoff which approximates a strangle. These solutions were used to test numerical schemes for solving a nonlinear Black-Scholes equation.
24 pages, 10 figures