Mr. Wilmott, as for me, I can not give an assessment :
I will try to show what I understood
1) Model with not diffusive equation means that there is no parabolic PDE (parabolic PDE like heat equation, 2nd order). So, we have only 1st order PDE. As well, in this model we don't have any stochastic processes.
2) I guess, I have a misunderstanding here,
Value of portfolio = Value(contract + n*hedging instrument) - n*cost of h.i.
3) The fact of nonlinearity gives us that the value of sum of the contracts does not equal to the sum of values of the contracts.
4) Briefly, we maximize portfolio value equation with some constraints on hedging instrument.
But how to derive it (Where is nonlinearity? For me it looks like trying to optimize linear function...)
On the other hand we have a solution of PDE
V(r,t)=f(r,c,t)∙e^(-c/2 (T-t)^2-r(T-t)) (sorry for this texting)
So, the value is the solution of that PDE.
What is f()? What is c? Where do you get that solution from?