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Modeling of financial processes with a space-time fractional diffusion equation of varying order

The result's identifiers

  • Result code in IS VaVaI

    <a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F68407700%3A21340%2F16%3A00306008" target="_blank" >RIV/68407700:21340/16:00306008 - isvavai.cz</a>

  • Result on the web

    <a href="http://dx.doi.org/10.1515/fca-2016-0073" target="_blank" >http://dx.doi.org/10.1515/fca-2016-0073</a>

  • DOI - Digital Object Identifier

    <a href="http://dx.doi.org/10.1515/fca-2016-0073" target="_blank" >10.1515/fca-2016-0073</a>

Alternative languages

  • Result language

    angličtina

  • Original language name

    Modeling of financial processes with a space-time fractional diffusion equation of varying order

  • Original language description

    In this paper, a new model for financial processes in form of a spacetime fractional diffusion equation of varying order is introduced, analyzed, and applied for some financial data. While the orders of the spatial and temporal derivatives of this equation can vary on different time intervals, their ratio remains constant and thus the global scaling properties of its solutions are conserved. In this way, the model covers both a possible complex short-term behavior of the financial processes and their long-term dynamics determined by its characteristic time-independent scaling exponent. As an application, we consider the option pricing and describe how it can be modeled by the space-time fractional diffusion equation of varying order. In particular, the real option prices of index S&P 500 traded in November 2008 are analyzed in the framework of our model and the results are compared with the predictions made by other option pricing models.

  • Czech name

  • Czech description

Classification

  • Type

    J<sub>x</sub> - Unclassified - Peer-reviewed scientific article (Jimp, Jsc and Jost)

  • CEP classification

    BA - General mathematics

  • OECD FORD branch

Result continuities

  • Project

    <a href="/en/project/GA14-07983S" target="_blank" >GA14-07983S: Vacuum structure in Quantum Field Theories</a><br>

  • Continuities

    P - Projekt vyzkumu a vyvoje financovany z verejnych zdroju (s odkazem do CEP)

Others

  • Publication year

    2016

  • Confidentiality

    S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Data specific for result type

  • Name of the periodical

    Fractional Calculus and Applied Analysis

  • ISSN

    1311-0454

  • e-ISSN

  • Volume of the periodical

    19

  • Issue of the periodical within the volume

    6

  • Country of publishing house

    US - UNITED STATES

  • Number of pages

    20

  • Pages from-to

    1414-1433

  • UT code for WoS article

    000394574400007

  • EID of the result in the Scopus database

    2-s2.0-85007578492