EMPIRICAL ANALYSIS OF NONLINEAR FINANCIAL MODELS

Abstract

A fractional-order derivative nonlinear financial model of economic dynamics is presented. By eliminating the limit operation, a derivative of the Jumari type may be discretized. The model's parameters and coefficients are estimated using the least squares method. An example application of this novel method for modeling financial systems is the modeling of the interest rate, investment, and inflation dynamics of the Indian national financial system. Empirical findings are shown over a range of discretization time steps, and the difference between the estimated data and the real data is displayed graphically. Interesting insights into the model are revealed by a comparison with a previous model of financial derivatives of integer order. The optimization of management strategy and decision technology in India's financial system may be greatly aided by using the fractional-order discrete approach to a nonlinear financial model. This reduces the risk of making incorrect predictions about the economy.