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On the Advent of Fractional Calculus in Econophysics via Continuous-Time Random Walk

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  • Francesco Mainardi

    (Department of Physics and Astronomy, University of Bologna, & The National Institute of Nuclear Physics (INFN), Via Irnerio 46, I-40126 Bologna, Italy)

Abstract

In this survey article, at first, the author describes how he was involved in the late 1990s on Econophysics, considered in those times an emerging science. Inside a group of colleagues the methods of the Fractional Calculus were developed to deal with the continuous-time random walks adopted to model the tick-by-tick dynamics of financial markets Then, the analytical results of this approach are presented pointing out the relevance of the Mittag-Leffler function. The consistence of the theoretical analysis is validated with fitting the survival probability for certain futures (BUND and BTP) traded in 1997 at LIFFE, London. Most of the theoretical and numerical results (including figures) reported in this paper were presented by the author at the first Nikkei symposium on Econophysics, held in Tokyo on November 2000 under the title “Empirical Science of Financial Fluctuations” on behalf of his colleagues and published by Springer. The author acknowledges Springer for the license permission of re-using this material.

Suggested Citation

  • Francesco Mainardi, 2020. "On the Advent of Fractional Calculus in Econophysics via Continuous-Time Random Walk," Mathematics, MDPI, vol. 8(4), pages 1-9, April.
    • Handle: RePEc:gam:jmathe:v:8:y:2020:i:4:p:641-:d:348609
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    References listed on IDEAS

    as
    1. Scalas, Enrico, 2006. "The application of continuous-time random walks in finance and economics," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 362(2), pages 225-239.
    2. Scalas, Enrico & Gorenflo, Rudolf & Mainardi, Francesco, 2000. "Fractional calculus and continuous-time finance," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 284(1), pages 376-384.
    3. Mainardi, Francesco & Raberto, Marco & Gorenflo, Rudolf & Scalas, Enrico, 2000. "Fractional calculus and continuous-time finance II: the waiting-time distribution," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 287(3), pages 468-481.
    4. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-654, May-June.
    5. Benoit Mandelbrot, 2015. "The Variation of Certain Speculative Prices," World Scientific Book Chapters, in: Anastasios G Malliaris & William T Ziemba (ed.), THE WORLD SCIENTIFIC HANDBOOK OF FUTURES MARKETS, chapter 3, pages 39-78, World Scientific Publishing Co. Pte. Ltd..
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