Numerical Treatment of a Partial Differential Equation for the Risk Preference(Practice,Mathematical Finance,<Special Issue>Joint Symposium of JSIAM Activity Groups 2008)

Abstract

Numerical treatment of a singular nonlinear partial differential equation (PDE) is made. The PDE is proposed to describe the evolution of the risk preference in the optimal investment problem under the random risk process. The bounding trans-formation is used for avoiding unboudedness of the domain. Implications of our results for financial economics are also discussed.