Finite difference/Fourier spectral for a time fractional Black-Scholes model with option pricing
type: Item
instance of: scholarly article
title: Finite difference/Fourier spectral for a time fractional Black-Scholes model with option pricing
zbMATH Open document ID: 1459.65197
DOI: 10.1155/2020/1393456
author: Juan He
author: Ai-qing Zhang
published in: Mathematical Problems in Engineering
publication date: 2020-10-13T00:00:00Z
review text: Summary: We study the fractional Black-Scholes model (FBSM) of option pricing in the fractal transmission system. In this work, we develop a full-discrete numerical scheme to investigate the dynamic behavior of FBSM. The proposed scheme implements a known \(L1\) formula for the \(\alpha \)-order fractional derivative and Fourier-spectral method for the discretization of spatial direction. Energy analysis indicates that the constructed discrete method is unconditionally stable. Error estimate indicates that the \(2-\alpha \)-order formula in time and the spectral approximation in space is convergent with order \(\mathcal{O}\left( \Delta t^{2 - \alpha} + N^{1 - m}\right)\), where \(m\) is the regularity of \(\mathbf{u}\) and \(\Delta t\) and \(N\) are step size of time and degree, respectively. Several numerical results are proposed to confirm the accuracy and stability of the numerical scheme. At last, the present method is used to investigate the dynamic behavior of FBSM as well as the impact of different parameters.
Mathematics Subject Classification ID: 65M70
Mathematics Subject Classification ID: 35R11
Mathematics Subject Classification ID: 91G60
Mathematics Subject Classification ID: 35Q91
zbMATH DE Number: 7259919
MaRDI profile type: MaRDI publication profile
full work available at URL: https://doi.org/10.1155/2020/1393456
OpenAlex ID: W3083199006
Wikidata QID: Q113268373
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description: scientific article; zbMATH DE number 7259919