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Stability Analysis for Pricing European Options Regarding the Interest Rate Generated by the Time Fractional Cox-Ingersoll-Ross Processes

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  • Mohamed Kharrat

    (College of Science, Jouf University
    Sfax University)

Abstract

In this paper, we introduce a new methodology for pricing European options when the interest rate is generated by the Time Fractional Cox-Ingersoll-Ross processes. A study was undertaken to corroborate the reliability, goodness of fit and stability of our approach. Certain numerical experiments were conducted so as to prove the obtained theoretical findings.

Suggested Citation

  • Mohamed Kharrat, 2023. "Stability Analysis for Pricing European Options Regarding the Interest Rate Generated by the Time Fractional Cox-Ingersoll-Ross Processes," Methodology and Computing in Applied Probability, Springer, vol. 25(2), pages 1-13, June.
    • Handle: RePEc:spr:metcap:v:25:y:2023:i:2:d:10.1007_s11009-023-10021-6
    DOI: 10.1007/s11009-023-10021-6
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    References listed on IDEAS

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    1. John C. Cox & Jonathan E. Ingersoll Jr. & Stephen A. Ross, 2005. "A Theory Of The Term Structure Of Interest Rates," World Scientific Book Chapters, in: Sudipto Bhattacharya & George M Constantinides (ed.), Theory Of Valuation, chapter 5, pages 129-164, World Scientific Publishing Co. Pte. Ltd..
    2. Vasicek, Oldrich, 1977. "An equilibrium characterization of the term structure," Journal of Financial Economics, Elsevier, vol. 5(2), pages 177-188, November.
    3. 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).
    4. 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.
    5. 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.
    6. 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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