Abstract:
Lie group symmetry methods provide a powerful tool for the analysis of PDEs. Over the last thirty years, considerable progress has been made in the development of this field. In this article, we provide a brief introduction to the method developed by Lie for the systematic computation of symmetries, then move on to a survey of some of the more recent developments. Our focus is on the use of Lie symmetry methods to construct fundamental solutions of partial differential equations of parabolic type. We will show how recent work has uncovered an intriguing connection between Lie symmetry analysis and the theory of integral transforms. Fundamental solutions of families of PDEs which arise in various applications, can be obtained by exploiting this connection. The major applications we give will be in financial mathematics. We will illustrate our results with the problem of pricing a so called zero coupon bond, as well as giving some applications to option pricing. We also discuss some results on group invariant solutions and show how an important PDE in nilpotent harmonic analysis can be studied via its group invariant solutions.
