The IRMA Community
Newsletters
Research IRM
Click a keyword to search titles using our InfoSci-OnDemand powered search:
|
Comparing the Exact and Approximate Solutions of Financial-Type Stochastic Differential Equations
|
|
Author(s): Nzotem Tchoumi Cyrille Audrey (University of Ngaoundere, Cameroon), Jimbo Henri Claver (Samarkand International University of Technology, Uzbekistan), Boris Zourmba Tizi (University of Ngaoundere, Cameroon), Tchoua Paul (University of Ngaoundere, Cameroon)and Eze Eze Donatien (University of Ngaoundere, Cameroon)
Copyright: 2025
Pages: 28
Source title:
Data Analytics and AI for Quantitative Risk Assessment and Financial Computation
Source Author(s)/Editor(s): Mohammad Gouse Galety (Samarkand International University of Technology, Uzbekistan), Jimbo Henri Claver (Samarkand Interntional University of Technology, Uzbekistan), A. V. Sriharsha (Mohan Babu University, India), Narasimha Rao Vajjhala (University of New York Tirana, Tirana, Albania)and Arul Kumar Natarajan (Samarkand International University of Technology, Uzbekistan)
DOI: 10.4018/979-8-3693-6215-0.ch007
Purchase
|
Abstract
In financial engineering, stock price prediction remains one of the most interesting problems of stock market analysis. One approach to solution consists of using historical data of the underlying asset to predict future prices while relying on stochastic differential equations for modeling stock price dynamics. The analytical solutions of financial-like stochastic differential equations are not always obvious; numerical methods for approximating the solutions are often considered. In this work, we propose the Euler-Maruyama method to compute the approximate solutions on both geometric Brownian motion and Heston-type models. We first perform the parameters estimation of the models and then compare the exact and approximate solutions of the models. We investigate the convergence of numerical solutions to analytical solutions for various situations and uncover interesting behaviors as we increase the time steps. Additionally, we discuss the impact of the volatility in price prediction with the specific case of stochastic volatility from the Heston model.
Related Content
|
Frederic Andres.
© 2027.
14 pages.
|
|
Kalsoom Safdar, Khairul Najmy Abdul Rani, Mohd Aminudin Jamlos, Siti Julia Rosli, Muhammad Usman Younus, Zanab Safdar.
© 2027.
27 pages.
|
|
Bani Adam, Binastya Anggara Sekti, Muhammad Adi Zacky Zahran.
© 2027.
24 pages.
|
|
Swetha Margaret T. A., Renuka Devi D..
© 2027.
31 pages.
|
|
Maurice Saluschke, Michael Schulz.
© 2027.
30 pages.
|
|
Mirjam Sepesy Maučec, Gregor Donaj.
© 2027.
16 pages.
|
|
Jorge A. Ruiz-Vanoye, Ocotlan Diaz-Parra, Ricardo A. Barrera-Cámara, Alejandro Fuentes-Penna, Francisco R. Trejo-Macotela, Jaime Aguilar-Ortiz, Eric Simancas-Acevedo.
© 2027.
21 pages.
|
|
|