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Valuation of Currency Option based on Uncertain Fractional Differential Equation
Version 1
: Received: 15 April 2024 / Approved: 15 April 2024 / Online: 16 April 2024 (11:07:10 CEST)
How to cite: Wang, W.; Ralescu, D. A.; Xue, X. Valuation of Currency Option based on Uncertain Fractional Differential Equation. Preprints 2024, 2024041008. https://doi.org/10.20944/preprints202404.1008.v1 Wang, W.; Ralescu, D. A.; Xue, X. Valuation of Currency Option based on Uncertain Fractional Differential Equation. Preprints 2024, 2024041008. https://doi.org/10.20944/preprints202404.1008.v1
Abstract
Uncertain fractional differential equation (UFDE) is an excellent tool for describing complicated dynamic systems. This paper analyzes the valuation problems of currency option based on UFDE under optimistic value criterion. Firstly, an uncertain fractional currency model is formulated to describe the dynamics of foreign exchange rate. Then, the pricing formulae of European, American and Asian currency option are obtained under optimistic value criterion, respectively. Finally, numerical simulations are provided to illustrate the validity of our theoretical results.
Keywords
uncertainty; fractional-order differential equation; currency option; optimistic value
Subject
Computer Science and Mathematics, Applied Mathematics
Copyright: This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
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