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Journal ArticleDOI

A numerical method for solving uncertain differential equations

01 May 2013-Journal of Intelligent and Fuzzy Systems (IOS Press)-Vol. 25, Iss: 3, pp 825-832
TL;DR: In this paper, a concept of α-path to uncertain differential equation is first introduced, which is a type of deterministic function that solves an associate ordinary differential equation and produces an inverse uncertainty distribution of the solution.
Abstract: Uncertain differential equation is a type of differential equation driven by canonical process. In this paper, a concept of α-path to uncertain differential equation is first introduced, which is a type of deterministic function that solves an associate ordinary differential equation. Then, a numerical method is designed for solving uncertain differential equations, which essentially solves each α-path and produces an inverse uncertainty distribution of the solution. To illustrate the efficiency of the numerical method, several examples are given.
Citations
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Journal ArticleDOI
Baoding Liu1
24 Apr 2013
TL;DR: In this article, the real stock price is impossible to follow any Ito's stochastic differential equation and it is suggested that a new uncertain finance theory should be developed based on uncertainty theory and uncertain differential equation.
Abstract: This paper first introduces a paradox of stochastic finance theory that shows the real stock price is impossible to follow any Ito’s stochastic differential equation. After a survey on uncertainty theory, uncertain process, uncertain calculus, and uncertain differential equation, this paper discusses some possible applications of uncertain differential equations to financial markets. Finally, it is suggested that a new uncertain finance theory should be developed based on uncertainty theory and uncertain differential equation.

234 citations

Journal ArticleDOI
19 Aug 2015
TL;DR: In this article, Asian option models are proposed for uncertain financial market and some mathematical properties are investigated, and the average price is presented in the Asian pricing formula which is difficult to compute, Yao-Chen formula is employed to solve this problem.
Abstract: Asian option is an important financial derivative instrument. It has been widely accepted by investors for its risk management property. Uncertain finance is a new field where the risk processes are described by uncertain processes. An asset price is assumed to follow a specific uncertain differential equation other than a stochastic differential equation. In this paper, Asian option models are proposed for uncertain financial market. Besides, Asian option pricing formulae are derived and some mathematical properties are investigated. Since the average price is presented in the Asian pricing formula which is difficult to compute, Yao-Chen formula is employed to solve this problem. Finally, several numerical examples are discussed.

161 citations


Cites background or methods from "A numerical method for solving unce..."

  • ...Yao and Chen [23] introduced the 99-method which is a numerical method for uncertain differential equations....

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  • ...(Yao and Chen [23]) Let α be a number with 0 < α < 1....

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  • ...(Yao-Chen formula, Yao and Chen [23]) Let Xt and Xαt be the solution and α-path of the uncertain differential equation dXt = f (t,Xt)dt + g(t,Xt)dCt respectively....

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  • ...(Yao-Chen formula, Yao and Chen [23]) Let Xt and X t be the solution and α-path of the uncertain differential equation dXt = f (t,Xt)dt + g(t,Xt)dCt respectively....

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  • ...(Yao and Chen [23]) Let α be a number with 0 α 1....

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Journal ArticleDOI
TL;DR: A Max-Min theorem is provided in order to guarantee the saddle-point Nash equilibrium, and when the system dynamics is described by a linear uncertain differential equation and the performance index function is quadratic, the existence of saddle- point Nash equilibrium is obtained via the solvability of a corresponding Riccati equation.
Abstract: Uncertain differential game investigates interactive decision making of players over time, and the system dynamics is described by an uncertain differential equation. This paper goes further to study the two-player zero-sum uncertain differential game. In order to guarantee the saddle-point Nash equilibrium, a Max–Min theorem is provided. Furthermore, when the system dynamics is described by a linear uncertain differential equation and the performance index function is quadratic, the existence of saddle-point Nash equilibrium is obtained via the solvability of a corresponding Riccati equation. Finally, a resource extraction problem is analyzed by using the theory proposed in this paper.

139 citations


Cites background from "A numerical method for solving unce..."

  • ...Yao and Chen [48] proved that the solution of an uncertain differential equation can be represented by a spectrum of ordinary differential equations....

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  • ...[39] B. S. Chen, C. S. Tseng, and H. J. Uang, “Fuzzy differential games for nonlinear stochastic systems: suboptimal approach,” IEEE Trans....

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  • ...[47] X. Chen and B. Liu, “Existence and uniqueness theorem for uncertain differential equations,” Fuzzy Optim....

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  • ...[38] C. Tan, Z. Jiang, X. Chen, and W. H. Ip, “A Banzhaf function for a fuzzy game,” IEEE Trans....

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  • ...[48] K. Yao and X. Chen, “A numerical method for solving uncertain differential equations,” J. Intell....

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Journal ArticleDOI
Kai Yao1
11 Jun 2013
TL;DR: In this paper, the uncertainty distributions of the extreme values, first hitting time, and integral of the solution of uncertain differential equation are given, and some solution methods are also documented in this paper.
Abstract: Uncertain differential equation is a type of differential equation involving uncertain process. This paper will give uncertainty distributions of the extreme values, first hitting time, and integral of the solution of uncertain differential equation. Some solution methods are also documented in this paper.

124 citations


Cites background or methods from "A numerical method for solving unce..."

  • ...Then Yao and Chen [17] proposed a numerical method for solving uncertain differential equation....

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  • ...(Yao and Chen [17]) Let α be a number with 0 < α < 1....

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  • ...Yao and Chen [17] proposed a concept of α-path, and found a connection between an uncertain differential equation and a spectrum of ordinary differential equations....

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Journal ArticleDOI
TL;DR: The foreign exchange rate is viewed as an uncertain processes, described by uncertain differential equations driven by the Liu process, and an uncertain currency model is built and the uncertain currency option problems are discussed.
Abstract: The Liu process is a new tool to deal with the noise process based on uncertainty theory. In this paper, we view the foreign exchange rate as an uncertain processes, described by uncertain differential equations driven by the Liu process, and build an uncertain currency model. Then, the uncertain currency option problems are discussed. Moreover, European and American currency option pricing formulas are derived for the proposed uncertain currency model and some mathematical properties are studied. Finally, two numerical examples are documented.

120 citations

References
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Book
14 Aug 2007
TL;DR: Mathematicians, researchers, engineers, designers, and students in the field of mathematics, information science, operations research, industrial engineering, computer science, artificial intelligence, and management science will find this work a stimulating and useful reference.
Abstract: Uncertainty theory is a branch of mathematics based on normality, monotonicity, self-duality, and countable subadditivity axioms. The goal of uncertainty theory is to study the behavior of uncertain phenomena such as fuzziness and randomness. The main topics include probability theory, credibility theory, and chance theory. For this new edition the entire text has been totally rewritten. More importantly, the chapters on chance theory and uncertainty theory are completely new. This book provides a self-contained, comprehensive and up-to-date presentation of uncertainty theory. The purpose is to equip the readers with an axiomatic approach to deal with uncertainty. Mathematicians, researchers, engineers, designers, and students in the field of mathematics, information science, operations research, industrial engineering, computer science, artificial intelligence, and management science will find this work a stimulating and useful reference.

1,450 citations


"A numerical method for solving unce..." refers background or methods in this paper

  • ...(Liu [5]) The uncertainty distribution of an uncertain variable ξ is defined by (x) = M{ξ ≤ x}...

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  • ...(Liu [5]) An uncertain variable is a function from an uncertainty space ( ,L,M) to the set of real numbers, i....

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  • ...(Liu [5]) The expected value of an uncertain variable ξ is defined by...

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  • ...Although stochastic process, stochastic calculus and stochastic differential equation find many applications in daily life, the evolution of some undetermined phenomena behaves not like randomness but like uncertainty, which was first pointed out by Liu [5]....

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  • ...Based on the axioms of uncertain measure, an uncertainty theory was founded by Liu [5] in 2007 and refined by Liu [8] in 2010....

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Book
07 Nov 2011
TL;DR: Mathematicians, researchers, engineers, designers, and students in the field of mathematics, information science, operations research, system science, industrial engineering, computer science, artificial intelligence, finance, control, and management science will find this work a stimulating and useful reference.
Abstract: Uncertainty theory is a branch of mathematics based on normality, monotonicity, self-duality, countable subadditivity, and product measure axioms. Uncertainty is any concept that satisfies the axioms of uncertainty theory. Thus uncertainty is neither randomness nor fuzziness. It is also known from some surveys that a lot of phenomena do behave like uncertainty. How do we model uncertainty? How do we use uncertainty theory? In order to answer these questions, this book provides a self-contained, comprehensive and up-to-date presentation of uncertainty theory, including uncertain programming, uncertain risk analysis, uncertain reliability analysis, uncertain process, uncertain calculus, uncertain differential equation, uncertain logic, uncertain entailment, and uncertain inference. Mathematicians, researchers, engineers, designers, and students in the field of mathematics, information science, operations research, system science, industrial engineering, computer science, artificial intelligence, finance, control, and management science will find this work a stimulating and useful reference.

1,004 citations


"A numerical method for solving unce..." refers background or methods in this paper

  • ...(Liu [8]) Let ξ be an uncertain variable with an uncertainty distribution ....

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  • ...In order to calculate the expected value via inverse uncertainty distribution, Liu [8] gave the following theorem....

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  • ...Based on the axioms of uncertain measure, an uncertainty theory was founded by Liu [5] in 2007 and refined by Liu [8] in 2010....

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01 Jan 2009
TL;DR: In this article, a new uncertain calculus is proposed and applied to uncertain difierential equation, flnance, control, flltering and dynamical systems based on the uncertainty theory.
Abstract: In addition to the four axioms of uncertainty theory, this paper presents the flfth axiom called product measure axiom. This paper also gives an operational law of independent uncertain variables and a concept of entropy of continuous uncertain variables. Based on the uncertainty theory, a new uncertain calculus is proposed and applied to uncertain difierential equation, flnance, control, flltering and dynamical systems. Finally, an uncertain inference will be presented. c

987 citations


"A numerical method for solving unce..." refers background or methods in this paper

  • ...Liu [7] verified the fundamental theorem of uncertain calculus, i....

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  • ...Uncertain calculus, proposed by Liu [7] in 2009, is a branch of mathematics that deals with differentiation and integration of functions of uncertain processes....

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  • ...(Liu [7]) Let Xt be an uncertain process and Ct be a canonical process....

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  • ...Liu [7] presented a stock model in which the bond price Xt and the stock price Yt are determined by { dXt = rXtdt dYt = eYtdt + σYtdCt (10)...

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  • ...Besides, the product uncertain measure on the product σ-algebra L was defined by Liu [7] as follows, Axiom 4: (Product Axiom) Let ( k,Lk,Mk) be uncertainty spaces for k = 1, 2, · · · Then the product uncertain measure M is an uncertain measure satisfying...

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Baoding Liu1
01 Jan 2008
TL;DR: In order to construct fuzzy counterparts of Brownian motion and stochastic calculus, some basic concepts of fuzzy process are proposed, including fuzzy calculus and fuzzy difierential equation, which are extended to hybrid process and uncertain process.
Abstract: This paper flrst reviews difierent types of uncertainty. In order to construct fuzzy counterparts of Brownian motion and stochastic calculus, this paper proposes some basic concepts of fuzzy process, including fuzzy calculus and fuzzy difierential equation. Those new concepts are also extended to hybrid process and uncertain process. A basic stock model is presented, thus opening up a way to fuzzy flnancial mathematics.

606 citations

Journal ArticleDOI

493 citations


"A numerical method for solving unce..." refers methods in this paper

  • ...The numerical methods based upon this strategy can be classified as Euler-Maruyama approximation (Maruyama [12]), Milstein approximation (Milstein [13]) and Runge-Kutta approximation...

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