2017
DOI: 10.1155/2017/6917828
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Laplace Transform Methods for a Free Boundary Problem of Time-Fractional Partial Differential Equation System

Abstract: We study the pricing of the American options with fractal transmission system under two-state regime switching models. This pricing problem can be formulated as a free boundary problem of time-fractional partial differential equation (FPDE) system. Firstly, applying Laplace transform to the governing FPDEs with respect to the time variable results in second-order ordinary differential equations (ODEs) with two free boundaries. Then, the solutions of ODEs are expressed in an explicit form. Consequently the earl… Show more

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Cited by 3 publications
(2 citation statements)
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“…The results are compared with that by the FDMs [25]; moreover the relative error (RE) criterion is adopted to measure the computational accuracy. Relative error is defined by (see, e.g., [26])…”
Section: Numerical Examplesmentioning
confidence: 99%
“…The results are compared with that by the FDMs [25]; moreover the relative error (RE) criterion is adopted to measure the computational accuracy. Relative error is defined by (see, e.g., [26])…”
Section: Numerical Examplesmentioning
confidence: 99%
“…Zhou and Gao [16] studied the pricing problem of the American options with fractal transmission system under two-state regime switching models, which could be formulated as a free boundary problem of time-fractional PDE system. Su et al [17] solved the problem of the partial differential equations by using local polynomial regression.…”
Section: Introductionmentioning
confidence: 99%