Laplace Transform in Finance

Author(s): N. A. Patil and Vijaya N. Patil

The main purpose of this note is to demonstrate how Laplace transforms techniques can be useful to economist. Laplace transforms have been widely used in valuing financial derivatives. In this paper, the present discounted value equation in finance is shown to be equivalent to the Laplace transformation in mathematics. Also we will focus on the general properties of the Laplace transform & present value rules for the elementary functions. And shows how the time derivative property is useful for the derivation of each rule using Laplace transforms/present value.

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