The valuation of currency options by fractional Brownian motion

Imagine an asset price that crashes to a low point, rebounds sharply as bargain-hunters step in, and then gradually declines. Such behavior can be modeled with a smooth function whose turning points represent locally overvalued and undervalued regions. A convenient example that captures rebound followed by decay is:The high and low points of this curve are identified using the first derivative test, which determines where the function changes from increasing to decreasing or vice versa. To...

A derivative describes how one quantity changes with respect to another, such as how velocity changes over time. The reverse process, which recovers a quantity from its rate of change, is known as integration. In physics, integration is fundamental because it links related physical quantities, allowing acceleration, velocity, and displacement to be understood as connected aspects of motion.Consider a car traveling at a steady speed of 20 meters per second when an obstacle appears 800 meters...

Continuous probability distributions are used to model random variables that can take on any real value within a specified range. These variables do not take on isolated or countable values but rather exist on a continuum. For example, the height of an individual can be measured with increasing precision—such as 163.5 or 165.25 centimeters—demonstrating that height is a continuous random variable.The behavior of such variables is described using a probability density function (PDF),...

DerivativesThe concept of instantaneous rate of change is fundamental in both mathematics and physics, particularly in describing how a moving object alters its position with respect to time. This rate is captured mathematically through the derivative of a function. The derivative at a point represents the slope of the tangent line to the curve of the function at that point and quantifies how the function’s output changes per infinitesimal change in input.Derivative of the Square Root...

If acceleration as a function of time is known, then velocity and position functions can be derived using integral calculus. For constant acceleration, the integral equations refer to the first and second kinematic equations for velocity and position functions, respectively.
Consider an example to calculate the velocity and position from the acceleration function. A motorboat is traveling at a constant velocity of 5.0 m/s when it starts to decelerate to arrive at the dock. Its acceleration is...

The first order operators using the del operator include the gradient, divergence and curl. Certain combinations of first order operators on a scalar or vector function yield second order expressions. Second-order expressions play a very important role in mathematics and physics. Some second order expressions include the divergence and curl of a gradient function, the divergence and curl of a curl function, and the gradient of a divergence function.
Consider a scalar function. The curl of its...