The Stock Option Pricing problem and the Conduction Heat Transfer Problem. Main Features: Need to become familiar with the associated stock option jargon.

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The Stock Option Pricing problem and the Conduction Heat Transfer Problem. Main Features: Need to become familiar with the associated stock option jargon. Compare governing equations, analytical solutions, and constraints. What heat conduction problem is satisfied by the boundary conditions of an option pricing problem?

Explanation of terms (1) Option Exercise price Asset price Expiry Call Put Volatility, risk-free interest rate

Explanation of Terms (2) Asset NameExercise Prices Asset ValueExpiry Dates Call Values C(S, t) Put Values P(S, t)

Governing Equations and Constraints Analytical Solution Black-Scholes Eq. Solutions for Call & Put 1D Heat Conduction

Heat Conduction problem satisfied by option- pricing constraints