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Fundamental Solutions for Zero-Coupon Bond Pricing Models

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Abstract

The transformation approach is employed to reduce one-factor bond-pricing equations into the heat equation for which the fundamental solution is wellknown. These transformations are subsequently used to construct the fundamental solutions of two zero-coupon bond-pricing equations. The closed-form analytical solutions of the Cauchy initial value problems of the two bond-pricing model equations are then obtained.

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Authors and Affiliations

  1. International Institute for Symmetry Analysis and Mathematical Modelling, Department of Mathematical Sciences, University of North-West, Private Bag X2046, Mmabatho, 2735, South Africa

    C. A. Pooe

  2. Centre for Differential Equations, Continuum Mechanics and Applications, School of Computational and Applied Mathematics, University of the Witwatersrand, Private Bag 3, Wits 2050, Johannesburg, South Africa

    F. M. Mahomed & C. Wafo Soh

  3. Associate member of ICTP, Trieste

    C. Wafo Soh

Authors
  1. C. A. Pooe
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  2. F. M. Mahomed
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  3. C. Wafo Soh
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Correspondence to F. M. Mahomed.

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Pooe, C.A., Mahomed, F.M. & Soh, C.W. Fundamental Solutions for Zero-Coupon Bond Pricing Models. Nonlinear Dynamics 36, 69–76 (2004). https://doi.org/10.1023/B:NODY.0000034647.76381.04

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  • DOI: https://doi.org/10.1023/B:NODY.0000034647.76381.04

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