Fractional differential equations for modelling financial processes with jumps

  • Xu Guo

Student thesis: Doctoral Thesis


The standard Black-Scholes model is under the assumption of geometric Brownian motion, and the log-returns for Black-Scholes model are independent and Gaussian. However, most of the recent literature on the statistical properties of the log-returns makes this hypothesis not always consistent. One of the ongoing research topics is to nd a better nancial pricing model instead of the Black-Scholes model. In the present work, we concentrate on two typical 1-D option pricing models under the general exponential L evy processes, namely the nite moment log-stable (FMLS) model and the the Carr-Geman-Madan-Yor-eta (CGMYe) model, and we also propose a multivariate CGMYe model. Both the frameworks, and the numerical estimations and simulations are studied in this thesis. In the future work, we shall continue to study the fractional partial di erential equations (FPDEs) of the nancial models, and seek for the e cient numerical algorithms of the American pricing problems. Keywords: fractional partial di erential equation; option pricing models; exponential L evy process; approximate solution.
Date of Award24 Aug 2015
Original languageEnglish
SupervisorLeevan LING (Supervisor)

User-Defined Keywords

  • Capital assets pricing model
  • Differential equations
  • Fractional calculus.

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