It is well known that the Black-Scholes model is used to establish the behavior of the option pricing in the financial market. In this paper, we propose the modified version of Black-Scholes model with two assets based on the Liouville-Caputo fractional derivative. The analytical solution of the proposed model is investigated by the Laplace transform homotopy perturbation method.

Abstract:The Black Scholes model is a well-known and useful mathematical model in financial markets. In this paper, the two-dimensional Black Scholes equation with European call option is studied. The explicit solution of this problem is carried out in the form of a Mellin-Ross function by using Laplace transform homotopy perturbation method. The solution example demonstrates that the proposed scheme is effective.

Abstract:The asset flow differential equation (AFDE) is the mathematical model that plays an essential role for planning to predict the financial behavior in the market. In this paper, we introduce the fractional asset flow differential equations (FAFDEs) based on the Liouville-Caputo derivative. We prove the existence and uniqueness of a solution for the FAFDEs. Furthermore, the stability analysis of the model is investigated and the numerical simulation is accordingly performed to support the proposed model.

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This paper aims to study the quenching problem in a fractional heat equation with the Riemann-Liouville fractional derivative. The existence and uniqueness of a solution for the problem are obtained by transforming the problem to an equivalent integral equation. The condition for the quenching occurrence in a finite time is given. Furthermore, the quenching point set is shown.