1. The fractional soliton solutions: shaping future finances with innovative wave profiles in option pricing system
- Author
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Hamood Ur Rehman, Patricia J. Y. Wong, A. F. Aljohani, Ifrah Iqbal, and Muhammad Shoaib Saleem
- Subjects
black-scholes equation ,option pricing modelling ,generalized ricatti mapping method (grem) ,new kudryashov's method (nkm) ,m-truncated fractional derivative ,Mathematics ,QA1-939 - Abstract
Financial engineering problems hold considerable significance in the academic realm, where there remains a continued demand for efficient methods to scrutinize and analyze these models. Within this investigation, we delved into a fractional nonlinear coupled system for option pricing and volatility. The model we examined can be conceptualized as a fractional nonlinear coupled wave alternative to the governing system of Black-Scholes option pricing. This introduced a leveraging effect, wherein stock volatility aligns with stock returns. To generate novel solitonic wave structures in the system, the present article introduced a generalized Ricatti mapping method and new Kudryashov method. Graphical representations, both in 3D and 2D formats, were employed to elucidate the system's response to pulse propagation. These visualizations enabled the anticipation of appropriate parameter values that align with the observed data. Furthermore, a comparative analysis of solutions was presented for different fractional order values. Additionally, the article showcases the comparison of wave profiles through 2D graphs. The results of this investigation suggested that the proposed method served as a highly reliable and flexible alternative for problem-solving, preserving the physical attributes inherent in realistic processes. To sum up, the main objective of our work was to conceptualize a fractional nonlinear coupled wave system as an alternative to the Black-Scholes option pricing model and investigate its implications on stock volatility and returns. Additionally, we aimed to apply and analyze methods for generating solitonic wave structures and compare their solutions for different fractional order values.
- Published
- 2024
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