Dynamic Approach for Financial Asset Price by Feynman â€“Kac Formula
Keywords:Feynman â€“Kac Formula, Stochastic Differential Equations, Ito's Rule, Partial Differential Equations (PDEs) and Geometric Brownian Motion (GBM) .
Â This paper has obtains the partial differential equation that describes the expected price of a financial asset whose price is a stochastic process given by a stochastic differential equation. We tried finding the expected selling price of an asset and exiting time by using of Feynman â€“Kac Formula. We assume that the asset is sold at the moment when its price rises above or falls below a certain limit, and thus the solutionÂ
vÂ has to satisfyÂ
x - v = 0Â at the boundary pointsÂ
x. The expected selling price depends nearly linearly on the price at timeÂ
t, and also weakly onÂ
t and the expected payoff of an asset for which a limit sales order has been placed and the same asset without sales order over a time spanÂ
T, as a function ofÂ
How to Cite
Behera, P. kumar (2018) “Dynamic Approach for Financial Asset Price by Feynman â€“Kac Formula”, Journal of Global Economy, 13(4), pp. 290–299. doi: 10.1956/jge.v13i4.474.