Black-Scholes Model (B-SM) simulates the dynamics of financial market and contains instruments such as options and puts which are major indices requiring solution. B-SM is known to estimate the correct prices of Europ...Black-Scholes Model (B-SM) simulates the dynamics of financial market and contains instruments such as options and puts which are major indices requiring solution. B-SM is known to estimate the correct prices of European Stock options and establish the theoretical foundation for Option pricing. Therefore, this paper evaluates the Black-Schole model in simulating the European call in a cash flow in the dependent drift and focuses on obtaining analytic and then approximate solution for the model. The work also examines Fokker Planck Equation (FPE) and extracts the link between FPE and B-SM for non equilibrium systems. The B-SM is then solved via the Elzaki transform method (ETM). The computational procedures were obtained using MAPLE 18 with the solution provided in the form of convergent series.展开更多
In this paper we investigate asymptotic behavior of error of a discrete time hedging strategy in a fractional Black-Scholes model in the sense of Wick-ItS-Skorohod integration. The rate of convergence of the hedging e...In this paper we investigate asymptotic behavior of error of a discrete time hedging strategy in a fractional Black-Scholes model in the sense of Wick-ItS-Skorohod integration. The rate of convergence of the hedging error due to discrete-time trading when the true strategy is known for the trader, is investigated. The result provides new statistical tools to study and detect the effect of the long-memory and the Hurst parameter for the error of discrete time hedging.展开更多
In this paper,the pricing formulae of the geometric average Asian call option with the fixed and floating strike price under the fractional Brownian motion(FBM)are given out by the method of partial differential equat...In this paper,the pricing formulae of the geometric average Asian call option with the fixed and floating strike price under the fractional Brownian motion(FBM)are given out by the method of partial differential equation(PDE).The call-put parity for the geometric average Asian options is given.The results are generalization of option pricing under standard Brownian motion.展开更多
Under the assumption of the underlying asset is driven by the mixed fractional Brownian motion, we obtain the mixed fractionalBlack-Scholes partial differential equation by fractional Ito formula, and the pricing form...Under the assumption of the underlying asset is driven by the mixed fractional Brownian motion, we obtain the mixed fractionalBlack-Scholes partial differential equation by fractional Ito formula, and the pricing formula of perpetual American put option bythis partial differential equation theory.展开更多
In this paper,a two dimensional(2D)fractional Black-Scholes(FBS)model on two assets following independent geometric Lévy processes is solved numerically.A high order convergent implicit difference scheme is const...In this paper,a two dimensional(2D)fractional Black-Scholes(FBS)model on two assets following independent geometric Lévy processes is solved numerically.A high order convergent implicit difference scheme is constructed and detailed numerical analysis is established.The fractional derivative is a quasidifferential operator,whose nonlocal nature yields a dense lower Hessenberg block coefficient matrix.In order to speed up calculation and save storage space,a fast bi-conjugate gradient stabilized(FBi-CGSTAB)method is proposed to solve the resultant linear system.Finally,one example with a known exact solution is provided to assess the effectiveness and efficiency of the presented fast numerical technique.The pricing of a European Call-on-Min option is showed in the other example,in which the influence of fractional derivative order and volatility on the 2D FBS model is revealed by comparing with the classical 2D B-S model.展开更多
文摘Black-Scholes Model (B-SM) simulates the dynamics of financial market and contains instruments such as options and puts which are major indices requiring solution. B-SM is known to estimate the correct prices of European Stock options and establish the theoretical foundation for Option pricing. Therefore, this paper evaluates the Black-Schole model in simulating the European call in a cash flow in the dependent drift and focuses on obtaining analytic and then approximate solution for the model. The work also examines Fokker Planck Equation (FPE) and extracts the link between FPE and B-SM for non equilibrium systems. The B-SM is then solved via the Elzaki transform method (ETM). The computational procedures were obtained using MAPLE 18 with the solution provided in the form of convergent series.
基金Supported by the National Natural Science Foundation of China(11671115)the Natural Science Foundation of Zhejiang Province(LY14A010025)
文摘In this paper we investigate asymptotic behavior of error of a discrete time hedging strategy in a fractional Black-Scholes model in the sense of Wick-ItS-Skorohod integration. The rate of convergence of the hedging error due to discrete-time trading when the true strategy is known for the trader, is investigated. The result provides new statistical tools to study and detect the effect of the long-memory and the Hurst parameter for the error of discrete time hedging.
基金Shanghai Leading Academic Discipline Project,China(No.S30405)Special Funds for Major Specialties of Shanghai Education Committee,China
文摘In this paper,the pricing formulae of the geometric average Asian call option with the fixed and floating strike price under the fractional Brownian motion(FBM)are given out by the method of partial differential equation(PDE).The call-put parity for the geometric average Asian options is given.The results are generalization of option pricing under standard Brownian motion.
文摘Under the assumption of the underlying asset is driven by the mixed fractional Brownian motion, we obtain the mixed fractionalBlack-Scholes partial differential equation by fractional Ito formula, and the pricing formula of perpetual American put option bythis partial differential equation theory.
基金supported by the Natural Science Foundation of Fujian Province2017J01555,2017J01502,2017J01557 and 2019J01646the National NSF of China 11201077+1 种基金China Scholarship Fundthe Natural Science Foundation of Fujian Provincial Department of Education JAT160274
文摘In this paper,a two dimensional(2D)fractional Black-Scholes(FBS)model on two assets following independent geometric Lévy processes is solved numerically.A high order convergent implicit difference scheme is constructed and detailed numerical analysis is established.The fractional derivative is a quasidifferential operator,whose nonlocal nature yields a dense lower Hessenberg block coefficient matrix.In order to speed up calculation and save storage space,a fast bi-conjugate gradient stabilized(FBi-CGSTAB)method is proposed to solve the resultant linear system.Finally,one example with a known exact solution is provided to assess the effectiveness and efficiency of the presented fast numerical technique.The pricing of a European Call-on-Min option is showed in the other example,in which the influence of fractional derivative order and volatility on the 2D FBS model is revealed by comparing with the classical 2D B-S model.
