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A Dynamic Competition Analysis of Stochastic Fractional Differential Equation Arising in Finance via Pseudospectral Method

Author

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  • Ishtiaq Ali

    (Department of Mathematics and Statistics, College of Science, King Faisal University, P.O. Box 400, Al-Ahsa 31982, Saudi Arabia)

  • Sami Ullah Khan

    (Department of Mathematics, City University of Science and Information Technology, Peshawar 2500, KP, Pakistan)

Abstract

This research focuses on the analysis of the competitive model used in the banking sector based on the stochastic fractional differential equation. For the approximate solution, a pseudospectral technique is utilized for the proposed model based on the stochastic Lotka–Volterra equation using a wide range of fractional order parameters in simulations. Conditions for stable and unstable equilibrium points are provided using the Jacobian. The Lotka–Volterra equation is unstable in the long term and can produce highly fluctuating dynamics, which is also one of the reasons that this equation is used to model the problems arising in finance, where fluctuations are important. For this reason, the conventional analytical and numerical methods are not the best choices. To overcome this difficulty, an automatic procedure is used to solve the resultant algebraic equation after the discretization of the operator. In order to fully use the properties of orthogonal polynomials, the proposed scheme is applied to the equivalent integral form of stochastic fractional differential equations under consideration. This also helps in the analysis of fractional differential equations, which mostly fall in the framework of their integrated form. We demonstrate that this fractional approach may be considered as the best tool to model such real-world data situations with very reasonable accuracy. Our numerical simulations further demonstrate that the use of the fractional Atangana–Baleanu operator approach produces results that are more precise and flexible, allowing individuals or companies to use it with confidence to model such real-world situations. It is shown that our numerical simulation results have a very good agreement with the real data, further showing the efficiency and effectiveness of our numerical scheme for the proposed model.

Suggested Citation

  • Ishtiaq Ali & Sami Ullah Khan, 2023. "A Dynamic Competition Analysis of Stochastic Fractional Differential Equation Arising in Finance via Pseudospectral Method," Mathematics, MDPI, vol. 11(6), pages 1-16, March.
  • Handle: RePEc:gam:jmathe:v:11:y:2023:i:6:p:1328-:d:1092363
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    References listed on IDEAS

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    1. Lakka, Spyridoula & Michalakelis, Christos & Varoutas, Dimitris & Martakos, Draculis, 2013. "Competitive dynamics in the operating systems market: Modeling and policy implications," Technological Forecasting and Social Change, Elsevier, vol. 80(1), pages 88-105.
    2. Christopher Nicholas Angstmann & Byron Alexander Jacobs & Bruce Ian Henry & Zhuang Xu, 2020. "Intrinsic Discontinuities in Solutions of Evolution Equations Involving Fractional Caputo–Fabrizio and Atangana–Baleanu Operators," Mathematics, MDPI, vol. 8(11), pages 1-16, November.
    3. Jocelyn Sabatier & Christophe Farges & Vincent Tartaglione, 2020. "Some Alternative Solutions to Fractional Models for Modelling Power Law Type Long Memory Behaviours," Mathematics, MDPI, vol. 8(2), pages 1-16, February.
    4. Ishtiaq Ali & Sami Ullah Khan, 2022. "Asymptotic Behavior of Three Connected Stochastic Delay Neoclassical Growth Systems Using Spectral Technique," Mathematics, MDPI, vol. 10(19), pages 1-15, October.
    5. Naseeb Gul & Sami Ullah Khan & Ishtiaq Ali & Farman Ullah Khan, 2022. "Transmission dynamic of stochastic hepatitis C model by spectral collocation method," Computer Methods in Biomechanics and Biomedical Engineering, Taylor & Francis Journals, vol. 25(5), pages 578-592, April.
    6. Atangana, Abdon & Khan, Muhammad Altaf, 2019. "Validity of fractal derivative to capturing chaotic attractors," Chaos, Solitons & Fractals, Elsevier, vol. 126(C), pages 50-59.
    7. Wang, Wanting & Khan, Muhammad Altaf & Fatmawati, & Kumam, P. & Thounthong, P., 2019. "A comparison study of bank data in fractional calculus," Chaos, Solitons & Fractals, Elsevier, vol. 126(C), pages 369-384.
    8. Ali, Ishtiaq & Ullah Khan, Sami, 2020. "Analysis of stochastic delayed SIRS model with exponential birth and saturated incidence rate," Chaos, Solitons & Fractals, Elsevier, vol. 138(C).
    9. Fatmawati, & Khan, Muhammad Altaf & Azizah, Muftiyatul & Windarto, & Ullah, Saif, 2019. "A fractional model for the dynamics of competition between commercial and rural banks in Indonesia," Chaos, Solitons & Fractals, Elsevier, vol. 122(C), pages 32-46.
    10. Qureshi, Sania & Atangana, Abdon, 2019. "Mathematical analysis of dengue fever outbreak by novel fractional operators with field data," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 526(C).
    11. Owolabi, Kolade M. & Atangana, Abdon, 2019. "Mathematical analysis and computational experiments for an epidemic system with nonlocal and nonsingular derivative," Chaos, Solitons & Fractals, Elsevier, vol. 126(C), pages 41-49.
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    1. Ishtiaq Ali & Maliha Tehseen Saleem, 2023. "Spatiotemporal Dynamics of Reaction–Diffusion System and Its Application to Turing Pattern Formation in a Gray–Scott Model," Mathematics, MDPI, vol. 11(6), pages 1-17, March.

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