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A New Stabled Relaxation Method for Pricing European Options Under the Time-Fractional Vasicek Model

Author

Listed:
  • Mohamed Kharrat

    (Jouf University)

  • Hassen Arfaoui

    (Jouf University)

Abstract

Our objective is to solve the time-fractional Vasicek model for European options with a new stabled relaxation method. This new approach is based on the splitting method. Some numerical tests are presented to show the stability and the reliability of our approach with the theory of options.

Suggested Citation

  • Mohamed Kharrat & Hassen Arfaoui, 2023. "A New Stabled Relaxation Method for Pricing European Options Under the Time-Fractional Vasicek Model," Computational Economics, Springer;Society for Computational Economics, vol. 61(4), pages 1745-1763, April.
    • Handle: RePEc:kap:compec:v:61:y:2023:i:4:d:10.1007_s10614-022-10264-4
    DOI: 10.1007/s10614-022-10264-4
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    References listed on IDEAS

    as
    1. Vasicek, Oldrich, 1977. "An equilibrium characterization of the term structure," Journal of Financial Economics, Elsevier, vol. 5(2), pages 177-188, November.
    2. Heston, Steven L, 1993. "A Closed-Form Solution for Options with Stochastic Volatility with Applications to Bond and Currency Options," The Review of Financial Studies, Society for Financial Studies, vol. 6(2), pages 327-343.
    3. Sun, Lin & Chen, Yiming, 2021. "Numerical analysis of variable fractional viscoelastic column based on two-dimensional Legendre wavelets algorithm," Chaos, Solitons & Fractals, Elsevier, vol. 152(C).
    4. Srivastava, H.M. & Dubey, V.P. & Kumar, R. & Singh, J. & Kumar, D. & Baleanu, D., 2020. "An efficient computational approach for a fractional-order biological population model with carrying capacity," Chaos, Solitons & Fractals, Elsevier, vol. 138(C).
    5. Vasicek, Oldrich Alfonso, 1977. "Abstract: An Equilibrium Characterization of the Term Structure," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 12(4), pages 627-627, November.
    6. 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.
    7. Goswami, Amit & Singh, Jagdev & Kumar, Devendra & Sushila,, 2019. "An efficient analytical approach for fractional equal width equations describing hydro-magnetic waves in cold plasma," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 524(C), pages 563-575.
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