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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

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    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. 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.
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