scholarly journals Option Pricing Formulas in a New Uncertain Mean-Reverting Stock Model with Floating Interest Rate

2020 ◽  
Vol 2020 ◽  
pp. 1-8
Author(s):  
Zhaopeng Liu
Keyword(s):  
Interest Rate ◽  
Option Pricing ◽  
Financial Market ◽  
American Option Pricing ◽  
European Option ◽  
Numerical Examples ◽  
Mathematical Properties ◽  
Proposed Model ◽  
Stock Model ◽  
The Interest Rate

Options play a very important role in the financial market, and option pricing has become one of the focus issues discussed by the scholars. This paper proposes a new uncertain mean-reverting stock model with floating interest rate, where the interest rate is assumed to be the uncertain Cox-Ingersoll-Ross (CIR) model. The European option and American option pricing formulas are derived via the α -path method. In addition, some mathematical properties of the uncertain option pricing formulas are discussed. Subsequently, several numerical examples are given to illustrate the effectiveness of the proposed model.

A Stock Model with Varying Stock Diffusion for Uncertain Market

2018 ◽  
Vol 26 (04) ◽  
pp. 679-692
Author(s):  
Shengguo Li ◽  
Jin Peng ◽  
Bo Zhang
Keyword(s):  
Option Pricing ◽  
Uncertainty Theory ◽  
European Option ◽  
Numerical Examples ◽  
European Option Pricing ◽  
Mathematical Properties ◽  
Proposed Model ◽  
Stock Model

The option-pricing problem is an important topic in modern finance. In this paper, we propose a stock model with varying stock diffusion based on uncertainty theory. The European option pricing formulas are derived from the proposed uncertain stock model, and some mathematical properties of these formulas are investigated. Moreover, extended uncertain stock models are introduced and discussed. Finally, numerical examples are given to illustrate the proposed model.

scholarly journals Lookback Option Pricing Problems of Uncertain Mean-Reverting Stock Model

2021 ◽  
Vol 25 (5) ◽  
pp. 539-545
Author(s):  
Zhaopeng Liu ◽  
Keyword(s):  
Interest Rate ◽  
Option Pricing ◽  
Asset Price ◽  
Option Price ◽  
Cir Model ◽  
Lookback Option ◽  
Proposed Model ◽  
Stock Model ◽  
Path Dependent ◽  
The Interest Rate

A lookback option is a path-dependent option, offering a payoff that depends on the maximum or minimum value of the underlying asset price over the life of the option. This paper presents a new mean-reverting uncertain stock model with a floating interest rate to study the lookback option price, in which the processing of the interest rate is assumed to be the uncertain counterpart of the Cox–Ingersoll–Ross (CIR) model. The CIR model can reflect the fluctuations in the interest rate and ensure that such rate is positive. Subsequently, lookback option pricing formulas are derived through the α-path method and some mathematical properties of the uncertain option pricing formulas are discussed. In addition, several numerical examples are given to illustrate the effectiveness of the proposed model.

Valuation of interest rate ceiling and floor based on the uncertain fractional differential equation in Caputo sense

2020 ◽  
pp. 1-10
Author(s):  
Ting Jin ◽  
Hui Ding ◽  
Bo Li ◽  
Hongxuan Xia ◽  
Chenxi Xue
Keyword(s):  
Interest Rate ◽  
Financial Market ◽  
Supply And Demand ◽  
Dynamic Change ◽  
Asset Price ◽  
Interest Rate Risk ◽  
Proposed Model ◽  
The Interest Rate ◽  
The Right ◽  
Predictor Corrector

As an economic lever in financial market, interest rate option is not only the function of facilitating the bank to adjust the market fund supply and demand relation indirectly, but also provides the guarantee for investors to choose whether to exercise the right at the maturity date, thereby locking in the interest rate risk. This paper mainly studies the price of the interest rate ceiling as well as floor under the uncertain environment. Firstly, from the perspective of expert reliability, rather than relying on a large amount of historical financial data, to consider interest rate trends, and further assume that the dynamic change of the interest rate conforms to the uncertain process. Secondly, since uncertain fractional-order differential equations (UFDEs) have non-locality features to reflect memory and hereditary characteristics for the asset price changes, thus is more suitable to model the real financial market. We construct the mean-reverting interest rate model based on the UFDE in Caputo type. Then, the pricing formula of the interest rate ceiling and floor are provided separately. Finally, corresponding numerical examples and algorithms are given by using the predictor-corrector method, which support the validity of the proposed model.

scholarly journals Analysis of a Four-Dimensional Hyperchaotic System Described by the Caputo–Liouville Fractional Derivative

Complexity ◽  
2020 ◽  
Vol 2020 ◽  
pp. 1-20
Author(s):  
Ndolane Sene
Keyword(s):  
Fractional Derivative ◽  
Financial Market ◽  
Numerical Scheme ◽  
Hyperchaotic System ◽  
Financial Model ◽  
Investment Demand ◽  
Proposed Model ◽  
Liouville Fractional Derivative ◽  
The Interest Rate ◽  
The Stability

A new four-dimensional hyperchaotic financial model is introduced. The novelties come from the fractional-order derivative and the use of the quadric function x 4 in modeling accurately the financial market. The existence and uniqueness of its solutions have been investigated to justify the physical adequacy of the model and the numerical scheme proposed in the resolution. We offer a numerical scheme of the new four-dimensional fractional hyperchaotic financial model. We have used the Caputo–Liouville fractional derivative. The problems addressed in this paper have much importance to approach the interest rate, the investment demand, the price exponent, and the average profit margin. The validation of the chaotic, hyperchaotic, and periodic behaviors of the proposed model, the bifurcation diagrams, the Lyapunov exponents, and the stability analysis has been analyzed in detail. The proposed numerical scheme for the hyperchaotic financial model is destined to help the agents decide in the financial market. The solutions of the 4D fractional hyperchaotic financial model have been analyzed, interpreted theoretically, and represented graphically in different contexts. The present paper is mathematical modeling and is a new tool in economics and finance. We also confirm, as announced in the literature, there exist hyperchaotic systems in the fractional context, which admit one positive Lyapunov exponent.

scholarly journals Fractional Order Stochastic Differential Equation with Application in European Option Pricing

2014 ◽  
Vol 2014 ◽  
pp. 1-12 ◽  
Author(s):  
Qing Li ◽  
Yanli Zhou ◽  
Xinquan Zhao ◽  
Xiangyu Ge
Keyword(s):  
Differential Equation ◽  
Stochastic Differential Equation ◽  
Option Pricing ◽  
Memory Effect ◽  
Fractional Order ◽  
Mean Value ◽  
European Option ◽  
European Option Pricing ◽  
Proposed Model ◽  
Pricing Formula

Memory effect is an important phenomenon in financial systems, and a number of research works have been carried out to study the long memory in the financial markets. In recent years, fractional order ordinary differential equation is used as an effective instrument for describing the memory effect in complex systems. In this paper, we establish a fractional order stochastic differential equation (FSDE) model to describe the effect of trend memory in financial pricing. We, then, derive a European option pricing formula based on the FSDE model and prove the existence of the trend memory (i.e., the mean value function) in the option pricing formula when the Hurst index is between 0.5 and 1. In addition, we make a comparison analysis between our proposed model, the classic Black-Scholes model, and the stochastic model with fractional Brownian motion. Numerical results suggest that our model leads to more accurate and lower standard deviation in the empirical study.

scholarly journals Competitive Analysis for Online Leasing Problem with Compound Interest Rate

2011 ◽  
Vol 2011 ◽  
pp. 1-12 ◽  
Author(s):  
Xingyu Yang ◽  
Weiguo Zhang ◽  
Weijun Xu ◽  
Yong Zhang
Keyword(s):  
Interest Rate ◽  
Competitive Analysis ◽  
The Other ◽  
Continuous Version ◽  
Numerical Examples ◽  
The Interest Rate ◽  
The One ◽  
Compound Interest ◽  
Theoretical Results ◽  
Deterministic Strategy

We introduce the compound interest rate into the continuous version of the online leasing problem and discuss the generalized model by competitive analysis. On the one hand, the optimal deterministic strategy and its competitive ratio are obtained; on the other hand, a nearly optimal randomized strategy is constructed and a lower bound for the randomized competitive ratios is proved by Yao's principle. With the help of numerical examples, the theoretical results show that the interest rate puts off the purchase date and diminishes the uncertainty involved in the decision making.

Sign in / Sign up

Export Citation Format

Share Document