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2011•Journal of Hangzhou Dianzi UniversityRequires access

The Application of Inverse-stable Subordinate in Foreign Exchange Market

Xiao Jian-bin

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Abstract

In this paper,we mainly use the method of Laplace transform,Laplace inverse transform.Based on the model(1),we give the fractional Fokker-Planck equation which satisfies the probability density function of the stochastic process {ΔX(Sα(t))}.Pointing out,the fractional Fokker-Planck equation is more excellent than the classical Fokker-Planck equation,for it describes the change of foreign exchange rate more rationally.Just based on this,we can derive the option price equation which is not classical.

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What this paper is about

In this paper,we mainly use the method of Laplace transform,Laplace inverse transform.Based on the model(1),we give the fractional Fokker-Planck equation which satisfies the probability density function of the stochastic process {ΔX(Sα(t))}.Pointing out,the fractional Fokker-Planck equation is more excellent than the classical Fokker-Planck equation,for it describes the change of foreign exchange rate more rationally.Just based on this,we can derive the option price equation which is not classical.

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Available abstract

In this paper,we mainly use the method of Laplace transform,Laplace inverse transform.Based on the model(1),we give the fractional Fokker-Planck equation which satisfies the probability density function of the stochastic process {ΔX(Sα(t))}.Pointing out,the fractional Fokker-Planck equation is more excellent than the classical Fokker-Planck equation,for it describes the change of foreign exchange rate more rationally.Just based on this,we can derive the option price equation which is not classical.

Key concepts: Fokker–Planck equation, Laplace transform, Inverse Laplace transform, Inverse, Probability density function, Mathematics, Applied mathematics, Laplace's equation

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