Option pricing formulas based on uncertain fractional differential equation

Weiwei Wang () and Dan A. Ralescu ()
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Weiwei Wang: Shanghai Jiao Tong University
Dan A. Ralescu: University of Cincinnati

Fuzzy Optimization and Decision Making, 2021, vol. 20, issue 4, No 3, 495 pages

Abstract: Abstract Uncertain fractional differential equations have been playing an important role in modelling complex dynamic systems. Early researchers have presented the extreme value theorems and time integral theorem on uncertain fractional differential equation. As applications of these theorems, this paper investigates the pricing problems of American option and Asian option under uncertain financial markets based on uncertain fractional differential equations. Then the analytical solutions and numerical solutions of these option prices are derived, respectively. Finally, some numerical experiments are performed to verify the effectiveness of our results.

Keywords: Uncertainty theory; Fractional differential equation; Extreme value; Time integral; Option pricing (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (3)

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DOI: 10.1007/s10700-021-09354-z

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