Financial mathematics

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Nonlocal equations are common in financial mathematics because the prices of assets can be modeled following any Levy process. In particular jump processes are natural since asset prices can have a sudden change.

The Black–Scholes model, which is used to price derivatives, is essentially a parabolic integro-differential equation for European options, and an obstacle problem for American options.

A good reference for financial modeling with jump processes is the book of Rama Cont and Peter Tankov [1]


  1. Cont, Rama; Tankov, Peter (2004), Financial modelling with jump processes, Chapman & Hall/CRC Financial Mathematics Series, Chapman & Hall/CRC, Boca Raton, FL, ISBN 978-1-58488-413-2 
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