Modulational Instability of the time-fractional Ivancevic option pricing model and the Coupled Nonlinear volatility and option price model
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arXiv
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| Auteurs principaux: | , , , , , , , |
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| Format: | Preprint |
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2024
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| _version_ | 1866916279982489600 |
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| author | Gaafele, C. Madimabe, Edmond B. Ndebele, K. Otlaadisa, P. Mozola, B. Matabana, T. Seamolo, K. Pilane, P. |
| author_facet | Gaafele, C. Madimabe, Edmond B. Ndebele, K. Otlaadisa, P. Mozola, B. Matabana, T. Seamolo, K. Pilane, P. |
| contents | We study the time-fractional Ivancevic option pricing model and the coupled nonlinear volatility and option price model via both modulational instability (MI) analysis and direct simulations. For the coupled volatility and option pricing model the coupling term for both the volatility and the option price equation is the same, the MI results are dependent on it, and the stability of the volatility exists for the same condition as that of the price. The numerical simulations are done to confirm the conditions of MI. For the time-fractional model the analysis shows that for some values of the Hurst exponent MI exists for negative values of the adaptive market heat potential. Also, the sign of the volatility does not affect the MI, even though for some values of the volatility the MI can be suppressed. Direct numerical simulation shows the existance of solitons for negative values of the adaptive market potential where instabilty exists due to the value of the Hurst exponent. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2405_19887 |
| institution | arXiv |
| publishDate | 2024 |
| record_format | arxiv |
| spellingShingle | Modulational Instability of the time-fractional Ivancevic option pricing model and the Coupled Nonlinear volatility and option price model Gaafele, C. Madimabe, Edmond B. Ndebele, K. Otlaadisa, P. Mozola, B. Matabana, T. Seamolo, K. Pilane, P. Pattern Formation and Solitons We study the time-fractional Ivancevic option pricing model and the coupled nonlinear volatility and option price model via both modulational instability (MI) analysis and direct simulations. For the coupled volatility and option pricing model the coupling term for both the volatility and the option price equation is the same, the MI results are dependent on it, and the stability of the volatility exists for the same condition as that of the price. The numerical simulations are done to confirm the conditions of MI. For the time-fractional model the analysis shows that for some values of the Hurst exponent MI exists for negative values of the adaptive market heat potential. Also, the sign of the volatility does not affect the MI, even though for some values of the volatility the MI can be suppressed. Direct numerical simulation shows the existance of solitons for negative values of the adaptive market potential where instabilty exists due to the value of the Hurst exponent. |
| title | Modulational Instability of the time-fractional Ivancevic option pricing model and the Coupled Nonlinear volatility and option price model |
| topic | Pattern Formation and Solitons |
| url | https://arxiv.org/abs/2405.19887 |