Fractional Riccati Equation and Its Applications to Rough Heston Model

Jeng, Siow Woon; Kılıçman, Adem

doi:10.20944/preprints202002.0311.v1

2020

DOI: 10.20944/preprints202002.0311.v1

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Fractional Riccati Equation and Its Applications to Rough Heston Model

Siow Woon Jeng¹,

Adem Kılıçman²

Abstract: Rough volatility models are popularized by \cite{gatheral2018volatility}, where they have shown that the empirical volatility in the financial market is extremely consistent with rough volatility. Fractional Riccati equation as a part of computation for the characteristic function of rough Heston model is not known in explicit form as of now and therefore, we must rely on numerical methods to obtain a solution. In this paper, we give a short introduction to option pricing theory and an overview of the current … Show more

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Cited by 11 publications

References 34 publications

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Распараллеливание численного алгоритма решения задачи Коши для нелинейного дифференциального уравнения дробного переменного порядка с помощью технологии OpenMP

Tverdyi¹,

Parovik²,

Hayotov³

et al. 2023

Вестник КРАУНЦ. Физико-Математические Науки

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The article presents a software implementation of a parallel efficient and fast computational algorithm for solving the Cauchy problem for a nonlinear differential equation of a fractional variable order. The computational algorithm is based on a non-local explicit finite-difference scheme, taking into account the approximation of the Gerasimov-Caputo fractional derivative VO included in the main differential equation. The algorithms for parallelization of the non-local explicit finite difference scheme were implemented as functions of the user library of the C programming language using the OpenMP technology. The OpenMP technology allows implementing parallel algorithms for working with the CPU computing node using its multithreading. The C language was chosen because of its versatility and lack of strict restrictions on memory handling. Further in the paper, the efficiency of the parallel algorithm is investigated. Efficiency is understood as the optimal ratio in coordinates: acceleration of calculations – the amount of RAM memory occupied, in comparison with the sequential version of the algorithm. The average computation time is analyzed in terms of: running time, acceleration, efficiency and cost of the algorithm. These algorithms were run on two different computing systems: a gaming laptop and a computing server. For a non-local explicit scheme, a significant performance increase of 3-5 times is shown for various methods of software implementation. В статье представлена программная реализация параллельного эффективного и быстрого вычислительного алгоритма решения задачи Коши для нелинейного дифференциального уравнения дробного переменного порядка. Вычислительный алгоритм основан на нелокальной явной конечно-разностной схеме с учетом аппроксимации дробной производной VO Герасимова-Капуто, входящей в основное дифференциальное уравнение. Алгоритмы распараллеливания нелокальной явной конечно-разностной схемы были реализованы в виде функций пользовательской библиотеки языка программирования C с использованием технологии OpenMP. Технология OpenMP позволяет реализовывать параллельные алгоритмы для работы с вычислительным узлом CPU, используя его многопоточность. Язык C выбран из-за его универсальности и отсутствия в нем строгих ограничений при работе с памятью. Далее в работе исследуется эффективность параллельного алгоритма. Под эффективностью понимается оптимальное соотношение в координатах: ускорение вычислений – объём занимаемой RAM памяти, по сравнению с последовательной версией алгоритма. Анализируется среднее время вычисления в терминах: время работы, ускорение, эффективность и стоимость алгоритма. Данные алгоритмы были запущены на двух различных вычислительных системах: игровом ноутбуке и вычислительном сервере. Для нелокальной явной схемы показан существенный прирост производительности в 3-5 раз при различных методах программной реализации.

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Распараллеливание численного алгоритма решения задачи Коши для нелинейного дифференциального уравнения дробного переменного порядка с помощью технологии OpenMP

Tverdyi¹,

Parovik²,

Hayotov³

et al. 2023

Вестник КРАУНЦ. Физико-Математические Науки

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Solution Method for Systems of Nonlinear Fractional Differential Equations Using Third Kind Chebyshev Wavelets

Polat

Ocak

2023

Axioms

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Chebyshev Wavelets of the third kind are proposed in this study to solve nonlinear systems of FDEs. The main goal of the method is to convert the nonlinear FDE into a nonlinear system of algebraic equations that can be easily solved using matrix methods. In order to achieve this, we first generate the operational matrices for the fractional integration using third kind Chebyshev Wavelets and block-pulse functions (BPF) for function approximation. Since the obtained operational matrices are sparse, the obtained numerical method is fast and computationally efficient. The original nonlinear FDE is transformed into a system of algebraic equations in a vector-matrix form using the obtained operational matrices. The collocation points are then used to solve the system of algebraic equations. Numerical results for various examples and comparisons are presented.

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Application of the Fractional Riccati Equation for Mathematical Modeling of Dynamic Processes with Saturation and Memory Effect

Tverdyi

Parovik

2022

Fractal Fract

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In this study, the model Riccati equation with variable coefficients as functions, as well as a derivative of a fractional variable order (VO) of the Gerasimov-Caputo type, is used to approximate the data for some physical processes with saturation. In particular, the proposed model is applied to the description of solar activity (SA), namely the number of sunspots observed over the past 25 years. It is also used to describe data from Johns Hopkins University on coronavirus infection COVID-19, in particular data on the Russian Federation and the Republic of Uzbekistan. Finally, it is used to study issues related to seismic activity, in particular, the description of data on the volumetric activity of Radon (RVA). The Riccati equation used in the mathematical model was numerically solved by constructing an implicit finite difference scheme (IFDS) and its implementation by the modified Newton method (MNM). The calculated curves obtained in the study are compared with known experimental data. It is shown that if the model parameters are chosen appropriately, the model curves will give results that correlate well with real experimental data. Moreover, with other parameters of the model, it is possible to make some prediction about the possible course of the considered processes.

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Fractional Riccati Equation and Its Applications to Rough Heston Model

Cited by 11 publications

References 34 publications

Распараллеливание численного алгоритма решения задачи Коши для нелинейного дифференциального уравнения дробного переменного порядка с помощью технологии OpenMP

Распараллеливание численного алгоритма решения задачи Коши для нелинейного дифференциального уравнения дробного переменного порядка с помощью технологии OpenMP

Solution Method for Systems of Nonlinear Fractional Differential Equations Using Third Kind Chebyshev Wavelets

Application of the Fractional Riccati Equation for Mathematical Modeling of Dynamic Processes with Saturation and Memory Effect

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