European option pricing model based on uncertain fractional differential equation

Ziqiang Lu (), Hongyan Yan () and Yuanguo Zhu ()
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Ziqiang Lu: Nanjing University of Science and Technology
Hongyan Yan: Nanjing Forestry University
Yuanguo Zhu: Nanjing University of Science and Technology

Fuzzy Optimization and Decision Making, 2019, vol. 18, issue 2, No 4, 199-217

Abstract: Abstract In this paper, we investigate a new version of stock model under uncertain circumstances for uncertain stock markets. Firstly, solutions to some uncertain fractional differential equations are presented by employing the Mittag-Leffler function. Then, a new uncertain stock model with mean-reverting process is formulated on the basis of uncertain fractional differential equations. Finally, European option pricing formulas based on the proposed model are investigated as well as some numerical examples.

Keywords: Uncertainty; Fractional differential equation; Mean reverting process; Option pricing (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (17)

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DOI: 10.1007/s10700-018-9293-4

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