PDEs in finance

In finance, Partial Differential Equations (PDEs) are mathematical tools used to model how the prices of financial assets, like options, evolve over time based on factors such as price movements, volatility, and interest rates. They help traders and analysts predict potential future values and assess risks by describing how an option's value changes in relation to underlying variables. PDEs serve as a foundation for important models, like the Black-Scholes equation, enabling more accurate and consistent pricing of complex financial derivatives.