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 article,a high-order scheme,which is formulated by combining the quadratic finite element method in space with a second-order time discrete scheme,is developed for looking for the numerical solution of a two-d...In this article,a high-order scheme,which is formulated by combining the quadratic finite element method in space with a second-order time discrete scheme,is developed for looking for the numerical solution of a two-dimensional nonlinear time fractional thermal diffusion model.The time Caputo fractional derivative is approximated by using the L2-1formula,the first-order derivative and nonlinear term are discretized by some second-order approximation formulas,and the quadratic finite element is used to approximate the spatial direction.The error accuracy O(h3+t2)is obtained,which is verified by the numerical results.展开更多
This paper deals with a stochastic representation of the rainfall process. The analysis of a rainfall time series shows that cumulative representation of a rainfall time series can be modeled as a non-Gaussian random ...This paper deals with a stochastic representation of the rainfall process. The analysis of a rainfall time series shows that cumulative representation of a rainfall time series can be modeled as a non-Gaussian random walk with a log-normal jump distribution and a time-waiting distribution following a tempered a-stable probability law. Based on the random walk model, a fractional Fokker-Planck equation （FFPE） with tempered a-stable waiting times was obtained. Through the comparison of observed data and simulated results from the random walk model and FFPE model with tempered a-stable waiting times, it can be concluded that the behavior of the rainfall process is globally reproduced, and the FFPE model with tempered a-stable waiting times is more efficient in reproducing the observed behavior.展开更多
In this paper, we use the fractional complex transform and the （G＇/G）-expansion method to study the nonlinear fractional differential equations and find the exact solutions. The fractional complex transform is prop...In this paper, we use the fractional complex transform and the （G＇/G）-expansion method to study the nonlinear fractional differential equations and find the exact solutions. The fractional complex transform is proposed to convert a partial fractional differential equation with Jumarie＇s modified Riemann-Liouville derivative into its ordinary differential equation. It is shown that the considered transform and method are very efficient and powerful in solving wide classes of nonlinear fractional order equations.展开更多
After we modified raw data for anomalies, we conducted spectral analysis using the data. In the frequency, the spectrum is best described by a decaying exponential function. For this reason, stochastic models characte...After we modified raw data for anomalies, we conducted spectral analysis using the data. In the frequency, the spectrum is best described by a decaying exponential function. For this reason, stochastic models characterized by a spectrum attenuated according to a power law cannot be used to model precipitation anomaly. We introduced a new model, the e-model, which properly reproduces the spectrum of the precipitation anomaly. After using the data to infer the parameter values of the e-model, we used the e-model to generate synthetic daily precipitation time series. Comparison with recorded data shows a good agreement. This e-model resembles fractional Brown motion (fBm)/fractional Lévy motion (fLm), especially the spectral method. That is, we transform white noise Xt to the precipitation daily time series. Our analyses show that the frequency of extreme precipitation events is best described by a Lévy law and cannot be accounted with a Gaussian distribution.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
In this paper, we consider the problem to determine the optimal time to sell an asset that its price conforms to the Black-Schole model but its drift is a discrete random variable taking one of two given values and th...In this paper, we consider the problem to determine the optimal time to sell an asset that its price conforms to the Black-Schole model but its drift is a discrete random variable taking one of two given values and this probability distribution behavior changes chronologically. The result of finding the optimal strategy to sell the asset is the first time asset price falling into deterministic time-dependent boundary. Moreover, the boundary is represented by an increasing and continuous monotone function satisfying a nonlinear integral equation. We also conduct to find the empirical optimization boundary and simulate the asset price process.展开更多
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the National Natural Science Fund(11661058,11761053)Natural Science Fund of Inner Mongolia Autonomous Region(2016MS0102,2017MS0107)+1 种基金Program for Young Talents of Science and Technology in Universities of Inner Mongolia Autonomous Region(NJYT-17-A07)National Undergraduate Innovative Training Project of Inner Mongolia University(201710126026).
文摘In this article,a high-order scheme,which is formulated by combining the quadratic finite element method in space with a second-order time discrete scheme,is developed for looking for the numerical solution of a two-dimensional nonlinear time fractional thermal diffusion model.The time Caputo fractional derivative is approximated by using the L2-1formula,the first-order derivative and nonlinear term are discretized by some second-order approximation formulas,and the quadratic finite element is used to approximate the spatial direction.The error accuracy O(h3+t2)is obtained,which is verified by the numerical results.
文摘This paper deals with a stochastic representation of the rainfall process. The analysis of a rainfall time series shows that cumulative representation of a rainfall time series can be modeled as a non-Gaussian random walk with a log-normal jump distribution and a time-waiting distribution following a tempered a-stable probability law. Based on the random walk model, a fractional Fokker-Planck equation （FFPE） with tempered a-stable waiting times was obtained. Through the comparison of observed data and simulated results from the random walk model and FFPE model with tempered a-stable waiting times, it can be concluded that the behavior of the rainfall process is globally reproduced, and the FFPE model with tempered a-stable waiting times is more efficient in reproducing the observed behavior.
文摘In this paper, we use the fractional complex transform and the （G＇/G）-expansion method to study the nonlinear fractional differential equations and find the exact solutions. The fractional complex transform is proposed to convert a partial fractional differential equation with Jumarie＇s modified Riemann-Liouville derivative into its ordinary differential equation. It is shown that the considered transform and method are very efficient and powerful in solving wide classes of nonlinear fractional order equations.
文摘After we modified raw data for anomalies, we conducted spectral analysis using the data. In the frequency, the spectrum is best described by a decaying exponential function. For this reason, stochastic models characterized by a spectrum attenuated according to a power law cannot be used to model precipitation anomaly. We introduced a new model, the e-model, which properly reproduces the spectrum of the precipitation anomaly. After using the data to infer the parameter values of the e-model, we used the e-model to generate synthetic daily precipitation time series. Comparison with recorded data shows a good agreement. This e-model resembles fractional Brown motion (fBm)/fractional Lévy motion (fLm), especially the spectral method. That is, we transform white noise Xt to the precipitation daily time series. Our analyses show that the frequency of extreme precipitation events is best described by a Lévy law and cannot be accounted with a Gaussian distribution.
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.
文摘In this paper, we consider the problem to determine the optimal time to sell an asset that its price conforms to the Black-Schole model but its drift is a discrete random variable taking one of two given values and this probability distribution behavior changes chronologically. The result of finding the optimal strategy to sell the asset is the first time asset price falling into deterministic time-dependent boundary. Moreover, the boundary is represented by an increasing and continuous monotone function satisfying a nonlinear integral equation. We also conduct to find the empirical optimization boundary and simulate the asset price process.
