Fractional Calculus and Fractional Processes With Applications To Financial Economics: Theory and Application 1st Edition Fabozzi

Fractional Calculus and Fractional
Processes with Applications to

Financial Economics: Theory and
Application 1st Edition Fabozzi
Visit to download the full and correct content document:
https://textbookfull.com/product/fractional-calculus-and-fractional-processes-with-appli
cations-to-financial-economics-theory-and-application-1st-edition-fabozzi/
More products digital (pdf, epub, mobi) instant
download maybe you interests ...
The Fractional Trigonometry: With Applications to

Fractional Differential Equations and Science 1st
Edition Carl F. Lorenzo
https://textbookfull.com/product/the-fractional-trigonometry-
with-applications-to-fractional-differential-equations-and-
science-1st-edition-carl-f-lorenzo/
Handbook of Fractional Calculus with Applications Vol 2

Fractional Differential Equations De Gruyter Reference
1st Edition Anatoly Kochubei (Editor)
https://textbookfull.com/product/handbook-of-fractional-calculus-
with-applications-vol-2-fractional-differential-equations-de-
gruyter-reference-1st-edition-anatoly-kochubei-editor/
Intelligent numerical methods Applications to

Fractional Calculus George A. Anastassiou
https://textbookfull.com/product/intelligent-numerical-methods-
applications-to-fractional-calculus-george-a-anastassiou/
Generalized Fractional Calculus: New Advancements and

Applications George A. Anastassiou
https://textbookfull.com/product/generalized-fractional-calculus-
new-advancements-and-applications-george-a-anastassiou/
Fractional Integral Transforms: Theory and Applications
1st Edition Zayed
https://textbookfull.com/product/fractional-integral-transforms-
theory-and-applications-1st-edition-zayed/
Handbook of Fractional Calculus with Applications Vol 1

Basic Theory De Gruyter Reference 1st Edition Anatoly
Kochubei (Editor)
with-applications-vol-1-basic-theory-de-gruyter-reference-1st-
edition-anatoly-kochubei-editor/
Fractional Dynamic Calculus and Fractional Dynamic

Equations on Time Scales Svetlin G. Georgiev
https://textbookfull.com/product/fractional-dynamic-calculus-and-
fractional-dynamic-equations-on-time-scales-svetlin-g-georgiev/
Handbook of Fractional Calculus with Applications

Volume 4 Applications in Physics Part A Tarasov
with-applications-volume-4-applications-in-physics-part-a-
tarasov/
Functional Numerical Methods: Applications to Abstract

Fractional Calculus 1st Edition George A. Anastassiou
https://textbookfull.com/product/functional-numerical-methods-
applications-to-abstract-fractional-calculus-1st-edition-george-
a-anastassiou/
Fractional Calculus and
Fractional Processes
with Applications to
Financial Economics
Fractional Calculus and
Fractional Processes
with Applications to
Financial Economics
Theory and Application
Hasan A. Fallahgoul
Sergio M. Focardi
Frank J. Fabozzi
Academic Press is an imprint of Elsevier
125 London Wall, London EC2Y 5AS, United Kingdom
525 B Street, Suite 1800, San Diego, CA 92101-4495, United States
50 Hampshire Street, 5th Floor, Cambridge, MA 02139, United States
The Boulevard, Langford Lane, Kidlington, Oxford OX5 1GB, United Kingdom
Copyright © 2017 Hasan A. Fallahgoul, Sergio M. Focardi, Frank J. Fabozzi.
Published by Elsevier Limited. All rights reserved.
No part of this publication may be reproduced or transmitted in any form or by any means,
electronic or mechanical, including photocopying, recording, or any information storage and
retrieval system, without permission in writing from the publisher. Details on how to seek
permission, further information about the Publisher’s permissions policies and our
arrangements with organizations such as the Copyright Clearance Center and the Copyright
Licensing Agency, can be found at our website: www.elsevier.com/permissions.
This book and the individual contributions contained in it are protected under copyright by
the Publisher (other than as may be noted herein).
Notices
Knowledge and best practice in this field are constantly changing. As new research and
experience broaden our understanding, changes in research methods, professional practices, or
medical treatment may become necessary.
Practitioners and researchers must always rely on their own experience and knowledge in
evaluating and using any information, methods, compounds, or experiments described herein.
In using such information or methods they should be mindful of their own safety and the
safety of others, including parties for whom they have a professional responsibility.
To the fullest extent of the law, neither the Publisher nor the authors, contributors, or editors,
assume any liability for any injury and/or damage to persons or property as a matter of
products liability, negligence or otherwise, or from any use or operation of any methods,
products, instructions, or ideas contained in the material herein.
Library of Congress Cataloging-in-Publication Data

A catalog record for this book is available from the Library of Congress
British Library Cataloguing in Publication Data

A catalogue record for this book is available from the British Library
ISBN: 978-0-12-804248-9
For information on all Academic Press publications

visit our website at https://www.elsevier.com/
Publisher : Nikki Levy

Acquisition Editor : Glyn Jones
Editorial Project Manager : Anna Valutkevich
Production Project Manager : Poulouse Joseph
Cover Designer : Mark Rogers
Typeset by SPi Global, India

HAF
To my mother Khadijeh and in memory of my father Abobakr Fallahgoul
SMF
To the memory of my parents
FJF
To my family
About the Authors
Hasan A. Fallahgoul is currently a postdoctoral researcher at the Swiss Finance
Institute @ EPFL, in the team lead by Professor Loriano Mancini. Prior to this
position, he was a postdoctoral researcher at the European Center for Advanced
Research in Economics and Statistics (ECARES), Université Libre de Bruxelles,
Belgium. His research interests are in financial econometrics, quantitative finance,
Lévy processes, and fractional calculus; specializing in heavy-tailed distributions
and their applications to finance. Dr. Fallahgoul has published several papers in
scientific journals including Quantitative Finance, Applied Mathematics Letters,
and Journal of Statistical Theory and Practice. He holds a PhD and MSc in
applied mathematics from the K. N. Toosi University of Technology.
Sergio M. Focardi is a professor of finance, director of the Master’s course in

Investment, Banking and Risk Management, and researcher at the finance group,
ESILV EMLV of the Pole Universitaire De Vinci, Paris. He is a founding partner
of The Intertek Group, Paris. Professor Focardi holds a degree in electronic engi-
neering from the University of Genoa, Italy, and a PhD in mathematical finance
from the University of Karlsruhe, Germany. A member of the Editorial Advi-
sory Board of The Journal of Portfolio Management, he has authored numerous
articles, monographs, and books.
Frank J. Fabozzi is a professor of finance at EDHEC Business School (Nice,

France) and a senior scientific adviser at the EDHEC-Risk Institute. He taught
at Yale’s School of Management for 17 years and served as a visiting professor at
MIT’s Sloan School of Management and Princeton University’s Department of
Operations Research and Financial Engineering. Professor Fabozzi is the editor of
The Journal of Portfolio Management and an associate editor of several journals,
including Quantitative Finance. The author of numerous books and articles on
quantitative finance, he holds a doctorate in economics from The Graduate Center
of the City University of New York.
Contents
List oJ illustrations xi
Part I Theory
1 Fractional calculus and fl'actional processes: an overview 3

1.1 Fr actional calculus 5
1.2 Frac tional processes 7
2 Ft'actional Calculus 12
21 Different definitions for fractional derivatives 12
2.1.1 Riemann-Liouville Fractiona.l Derivative 13
2.1.2 Caputo Fractional Derivative 15
2."1.3 G ri.inwal d- Letnikov Fractional Derivative 16
2.1.4 Fractional derivative based 011 the Pourier transform 17
2.2 Computation with i\fatlab 18
Key points of the chapter 20
3 Fractional Brownian Motion 23

3.1 Definition 24
3.2 Long-Range Dependency 26
3.3 Self-Similarity 28
3.4 Existence of Arbitrage :30
[(ey points of the chapter 32
4 Fractional Diffusion and Heavy Tail Distribution s: Stable

Distribution 33
4.1 Uni variate Stable Distribution 33
4.1.1 Homot.opy Perturba.t.ion Method 34
4 . .1.2 Adomian Decomposit.ion Method 35
4 .1.3 Varia.tionnl Itera.tion IVfethod 35
4.2 I\ fultivaria.te Stable Distribution 36
4.2.1 Homotopy Perturbation Method 37
4 .2.2 Adollliall Decomposit.ioll Method 39
4.2.3 Variation",-l Iteration Method 39
x ConLenLs
5 Fractiona l Diffusion and Heavy Tail Distribution s: Geo-Stable

Distribution 41
5.1 Univariate Geo-stable Distribution 41
5.1.1 Homotopy Pe r t ur bation Method 43
5.1.2 Adomian DecomposiLioll Method 47
5.1.:3 Varia.tional l i.. crat.ion lVlcthod 49
5.2 l\ r ultivariate Geo-stable Distribution 52
5.2.1 Homotopy Pe rturbation Method 52
.5.2.2 Adomian Decomposition Method 53
5.2.:3 Variat.ional I t.erat.ion Method 54
Part II Applications 57
6 Fractional Pru,tial Differential Equation and Option Pricing 59

6.1 Option Pricing and Brownian l\ r otion 61
6.1.1 Stochastic Differential Equation 61
6.1.2 Partial Differential Equation 62
6.2 Opt.ion Pricing and the Levy Process 65
6.2.1 Levy Process 66
6.2.2 CGMY Process 67
6.2.3 Stochastic Differential Equation 67
6.2.4 Partial Tntegro-Difrerential Equation 72
Enropean Option 74
6.2.5 Fract.ional Partial DilTercnt.ial Equat.ion 75
Characteristic Function 76
E uropean Option 77
Key poin ts of the chapter 79
7 Continuous-T ilne RandOll1 Walk and Fractional Calculus 81

7.1 Continuous-Time Random \oValk 81
7.2 Fractional Calculus and Probability Density Function 83
7.2.1 Uncoupled 84
7.2.2 Coupled Case 85
7.3 Applica.tions 86
7.3.1 Dynamics of the Asset Pri ces 86
Kcy points of thc chapter 89
8 Applications of Fractional Processes 91

8.1 Frac tionally Integra.ted Time Series 92
8.2 Stock- Returns '-\ltd Volatility Processes 93
8.3 lllterest-Ratc Processes 95
8.4 Order A rrival Processes 95
Kcy points of thc chapter 96
RefeTences 97
Index 103
Illustrations
2.1 Derivative or integral operator 13

2.2 Ordinary derivative 19
2.3 Fractional derivative 21
2.4 Ordinary derivative and integral 21
2.5 Fractional derivative 22
3.1 Sample Paths for the Fractional Brownian motion 25
3.2 Log-price and log-return for the S&P500 27
3.3 Sample autocorrelation for the: (top) log-return of the S&P500, and
(down) absolute log-return of the S&P500 27
3.4 The connection among LRD, self-similar process, fBm and Lévy process 29
6.1 The probability density function for the stable and Gaussian distribution 60
6.2 The risk-neutral probability density function 65
6.3 Trajectory for the CGMY process 67
6.4 Implied volatility for the CGMY process 71
6.5 Risk-neutral density for the CGMY process 72
7.1 Continous-time random walk 87
1
Fractional calculus and fractional processes:

an overview
In this monograph we discuss how fractional calculus and fractional processes are
used in financial modeling, finance theory, and economics. We begin by giving
an overview of fractional calculus and fractional processes, responding upfront to
two important questions:
1. What is the fractional paradigm for both calculus and stochastic processes?
2. Why is the fractional paradigm important in science in general and in finance
and economics in particular?
Fractional calculus is a generalization of ordinary calculus. Calculus proved
to be a key tool for modern science because it allows the writing of differential
equations that link variables and their rates of change. Differential equations
ushered in modern theoretical quantitative science. A key reason for the success
of differential equations in science is that the description of physical phenomena
simplifies locally. For example, to understand how temperature propagates in a
rod when we apply a source of heat to one of its extremities. While the actual
description of the propagation of temperature can be rather complex in function
of the source of heat, locally, the heat equation is quite easy: at any point on the
rod, the time derivative of the temperature is proportional to the second space
2
derivative: ∂T
∂t
= k ∂∂xT2 . This is the key for the success of differential equations in
science: phenomena simplify locally and one can write a simple, yet extremely
powerful, general law.
However, not all problems are local. Many problems in physics, engineering,
and economics are of a global nature. Consider, for example, variational problems,
where the objective is to optimize a functional, that is, to find an optimum in
a space of functions. Though variational problems are not local, it has been a
major mathematical success to translate variational problems into integral or
differential equations. Still the formalism of fractional calculus is a very useful
tool for solving variational problems.
A widely cited example is Abel’s integral equation, which solves the problem
of the tautochrone. A tautochrone is a curve on a vertical plane such that the
time that it takes a point freely sliding on the curve under the sole influence of
gravity to reach the lowest point is a constant independent of its starting point.
Abel’s integral equations can be solved with a fractional derivative.
The problem of the tautochrone is essentially a variational problem. A pro-
found link has been established in several recent papers between the calculus of
http://dx.doi.org/10.1016/B978-0-12-804248-9.50001-2, 3
4 Fractional calculus and fractional processes: an overview
variations and fractional calculus, (see, Gorenflo et al. (2001) and Mainardi et al.
(2000).). The calculus of variations is one of the main mathematical tools used
in science and engineering. Classical dynamics, for example, can be formulated
in variational terms as the problem of maximizing Hamiltonian functionals. Con-
trol theory is based on variational principles. Fractional calculus is very useful in
formulating and solving variational problems. It is the non local characteristic of
fractional calculus that makes it interesting (in science and engineering).
Fractional calculus is also useful in computing probability distribution func-
tions with fat tails, widely used in financial risk management. As we will see in
Chapters 4 and 5, the solutions of some fractional partial differential equations
represent fat-tailed, stable distributions. These distributions cannot be described
with closed formulas. Numerical approximations are needed. Fractional calculus
provides useful tools for computing numerically fat-tailed stable distributions.
Solving fractional partial differential equations proved to be an important tool
in pricing financial contracts such as options. But classical Black-Scholes equa-
tions (see Black and Scholes (1973)) fail in many practical applications of option
pricing. As we will see in Chapter 6, fractional differential equations provide
better approximations to option pricing.
The fractional paradigm applies not only to calculus but also to stochastic
processes, used in many applications in finance and economics such as modeling
volatility and interest rates and modeling high frequency data. The key features
of fractional processes that make them interesting to these disciplines include the
following:
1. Long-range memory
2. Path-dependence, non Markovian properties
3. Self-similarity
4. Fractal paths
5. Anomalous diffusion behavior.
The definition and properties of fractional processes look very different from
those of fractional calculus; actually, fractional processes such as fractional Brow-
nian motions are defined in terms of long-range dependence, that is, persistent
autocorrelation. The fractional nature of these processes appears in some pa-
rameters that characterize autocorrelations, namely the so called Hurst-exponent
H, which might assume fractional values as opposed to integer values. And an-
other important feature of fractional processes, self-similarity, is also represented
d
through a fractional exponent H in the relationship{Xct } = {cH Xt }.
Anomalous diffusions are defined in terms of the growth rate of the diffusion
process. The variance of an anomalous diffusion grows as tα , that is, var (Xt ) ∝ tα ,
where α is a fractional exponent as opposed to the α = 1 integer exponent of
normal diffusions. Anomalous diffusions can be represented through fractional
Brownian motions or through continuous-time random walks.
What is the relationship between fractional calculus and the properties (persis-
tent correlations, self-similarity, and growth of variance) of fractional processes
1.1 Fractional calculus 5
and anomalous diffusions? There is indeed a deep relationship insofar as the

evolution of the probability distribution of fractional processes and anomalous
diffusions can be represented as fractional partial differential equations. These
fractional partial differential equations are the fractional equivalent of the Fokker-
Planck-Kolmogorov equations associated with normal diffusions. However, the
non Markovian character of fractional processes and anomalous diffusions does
not allow one to write a fractional equivalent of the dual representation of nor-
mal diffusions in terms of stochastic differential equations and Fokker-Planck-
Kolmogorov partial differential equations.
Let’s now briefly consider some areas where fractional processes and anomalous
diffusions find applications in finance and economics. Given the state-of-the-art,
it now appears clear that fractional processes are applicable to at least some
financial processes that exhibit long memory. For example, it has been empirically
demonstrated that volatility and trading volumes are long-memory processes.
Fractional processes have been proposed and used to model these phenomena.
Another source of long-memory processes are ultra-high frequency data (tick-by-
tick data) and high-frequency trading strategies. Continuous-time random walks
and the associated fractional equations can represent the arrival of orders (and
prices) and phenomena associated with inter-arrival times.
Fractional processes have also found application in the modeling of interest
rates. However, one area that appeared promising – the representation of stock
prices and returns as fractional processes with long-range memory – is now being
debated: it was discovered that, in continuous time, representing asset prices
as fractional Brownian motions leads to arbitrage conditions. This problem has
significantly limited the use of fractional processes in finance – at least for the
moment.
These and other applications will be described in Chapter 8. Let’s now provide
an overview of fractional calculus and fractional processes.
1.1 Fractional calculus

Fractional calculus is a generalization and extension of classical calculus. The
development of calculus is usually attributed to Gottfried Leibnitz and Isaac
Newton, though the two men had a bitter life-long dispute as to which of them
actually developed calculus. Leibnitz published his first work on calculus in 1684;
Newton made use of calculus in his Principia published in 1687. Although some
of the key ideas of calculus had been known for centuries to Greek, Arab, and
Persian mathematicians, it was Leibnitz and Newton who created a complete
framework for calculus and established the fundamental theorem of calculus that
links derivatives and integrals.
df
The derivative of a function, represented as dx orf 0 , is defined as the limit, if
df
it exists, of the difference quotient: dx = lim ∆f , while the (indefinite) integral
Rx ∆x→0 ∆x P
is defined as the limit of the sum a f (u) du = lim ∆f ∆x, where the sum is
extended to all ∆x that form a partition of the interval (a, x).
A function F (x) is called an antiderivative (or primitive function) of f (x) if:

dF (x)
dx
= f (x). TheR x fundamental theorem of calculus states that the indefinite
integral F (x) = a f (u) du is a primitive function of f (x) and that the definite
Rb
integral can be computed as a f (u) du = F (b) − F (a), where F is any primitive
function of f. Integration is the inverse operation of differentiation.
By recursively applying the operation of taking a derivative n−1 (differentiation),
we can define derivatives of any order: D (f ) = dx ddxn−1f . We can apply
n d
the same iterative process

R x R y to integration
Ry in order to define the integral n m
of n-
th order: . D−n (f ) ≡ a a 1 · · · a n−1 f (yn ) dyn dyn−1 · · · dy1 . Therefore: d dx D f
n =
m−n
D f, m > n.
The following integration formula, generally attributed to Cauchy, holds:
Z x Z y1 Z yn−1 Z x
1 n−1
D−n f ≡ ··· f (yn ) dyn dyn−1 · · · dy1 = (x − t) f (t) dt
a a a (n − 1)! a
(1.1)
Immediately after the introduction of calculus, it became a key research topic
for mathematicians. In 1695, a leading mathematician of his time and author of
the first French treatise on calculus, le Marquis de l’Hôpital Guillaume François
Antoine wrote to Leibnitz asking what would happen if the order of differentiation
were a real number instead of an integer. Leibnitz’s reply: “It will lead to a
paradox, from which one day useful consequences will be drawn.” This exchange
between Marquis and Leibnitz is generally considered to be the beginning of
fractional calculus. However, the actual development of fractional calculus had
to wait until 1832. It was then that Joseph Liouville first introduced what is
now called the Riemann-Liouville definition of fractional derivative, based on the
Riemann-Liouville fractional integral:
Z x
−α 1 α−1
D f≡ (x − t) f (t) dt.
Γ (α) a
It is interesting to look at the mathematical strategy used in defining fractional
derivatives. The starting point is the Cauchy formula
x y1 yn−1 x
1
Z Z Z Z
−n n−1
D f≡ ··· f (yn ) dyn dyn−1 · · · dy1 = (x − t) f (t) dt
a a a (n − 1)! a
that we mentioned above. Using the Gamma function, the Cauchy formula can
be generalized to the Riemann-Liouville fractional integral:
Z x
−α 1 α−1
D f≡ (x − t) f (t) dt. (1.2)
Γ (α) a
This formula is well-defined in ordinary calculus under rather general conditions
that will be discussed in the chapters to follow. Therefore, it can be used to
generalize the notion of integral of order n, where n is an integer, to that of
integral of order α > 0 where α is a real number.
The next step is to define the derivative of order α > 0. In essence, the process
1.2 Fractional processes 7
is the following. nWe know how to define D−α f for any real α
number and we know
how to define ddxnf for any integer number. To define ddxαf for any real number
α > 0, we find the largest integer m such that m − 1 < α < m and we define the
(left) fractional derivative of order α in two steps. First we perform a fractional
integration of order m − α, which is a positive number. Then we take the m-th
order derivative. This is called the left-hand fractional derivative given by
dα f dm
= (J α f ) (1.3)
dxα dxm
Many other definitions of fractional derivatives have been proposed. Most defi-
nitions are based on the Riemann-Liouville integral; other definitions extend the
notion of the difference quotient. In this monograph we will discuss several of these
definitions. Using fractional derivatives, we can extend the notion of differential
equations to fractional differential equations and fractional integral equations.
Let’s now ask: What is the geometrical or physical interpretation of fractional
calculus? What is the difference between classical calculus and fractional calculus?
Why is fractional calculus important? Besides the purely mathematical interest,
what is the practical interest of fractional calculus?
The question of the geometrical or physical interpretation of fractional calculus
has been discussed for some 300 years without reaching a conclusion. Classical
integral and derivatives have well-known and clear geometrical interpretations in
terms of tangent lines, tangent planes, and areas. Physical interpretations are
also clear in terms of speed and acceleration. However, there is no consensus
on the interpretation of fractional integrals and derivatives. The interpretation
of fractional derivatives and integrals was recognized as one of the unresolved
problems at the first International Conference on Fractional Calculus held in
1974 in New Haven, Connecticut.
Subsequent attempts to provide an interpretation have been made. For exam-
ple, Podlubny (1998) proposed the “fence interpretation” for stochastic integrals.
The possibility of links between fractional calculus and fractals has also been
proposed. However, the problem has remained basically unresolved. Despite this,
some of the main features and advantages of fractional calculus are well-known, in
particular the properties of non locality and the representation of (long) memory
processes.
1.2 Fractional processes

After outlining the main concepts of fractional calculus, let’s now discuss the frac-
tional paradigm for stochastic processes. As we will see, the fractional paradigm
for stochastic processes has two representations:
1. direct description of fractional processes, especially fractional Brownian mo-

tion,
2. the fractional equivalent of the Fokker-Planck equation for describing processes
such as the continuous-time random walks.
However, we will see that there is no simple duality of representations as in the

case of diffusions.
In order to understand the peculiar characteristics of fractional processes and
their relationships with fractional calculus, it is useful to outline the classical
theory of diffusions. Diffusions have a dual equivalent representation in terms of
stochastic differential equations and deterministic partial differential equations.
After outlining the classical theory of diffusions, we will see how these represen-
tations carry on to fractional processes and abnormal diffusions.
Much neoclassical finance theory and economics are based on Markovian
continuous-time stochastic processes. Using a representation which has become
standard in finance theory and economics, consider first a probability space
(Ω, = (=t ) , P ) formed by a set of possible “states of the world”ω ∈ Ω, a sigma-
algebra = endowed with a filtration (=t ), and a probability measure P . A stochas-
tic process is an infinite collection of random variables Xt (ω) indexed by time.
Given t, Xt (ω) is a random variable; given ω, Xt (ω) is a path of the stochastic
process.
A stochastic process is called Markovian if it has the Markov property which is
expressed as follows: P (Xs |=t ) = P (Xs |Xt ) , t < s or, equivalently, P (Xs |=t ) =
P (Xs |σ (Xt ) , t < s). That is, the probability distribution of Xs given the infor-
mation available at time t<s, which is embodied in the sigma-algebra =t , is equal
to the probability distribution of Xs given the value taken by Xt .
Financial and economic processes are often represented as diffusions. A diffu-
sion is a Markovian stochastic process with continuous sample paths. Diffusions
are characterized by a drift and diffusion coefficients. Two main representations
of diffusions are used in finance and economics. The first is based on stochastic
differential equations:
dXt = µ(Xt , t) dt + σ(Xt , t) dBt (1.4)
where µ, σ are deterministic functions of (Xt , t) called, respectively, the drift and
the diffusion coefficients, and dBt is the stochastic differential of the standard
Brownian motion Bt , also called a Wiener process. The standard Brownian motion
is defined as a process that starts at zero, has continuous paths, and independent
Gaussian increments. Paths of Brownian motions have fractal dimension. It can
be demonstrated that such a process exists.
The second representation is based on a partial differential equation, the For-
ward Kolmogorov equation, also called the Fokker-Planck equation. The Fokker-
Planck equation describes the evolution of the conditional probability density
function p of Xt . It states that:
∂p ∂ 1 ∂2
σ 2 (x, t) p

=− (µ (x, t) p) + 2
(1.5)
∂t ∂x 2 ∂x
where p is the conditional density p ≡ p (x, t |y, s ) and µ, σ the drift and the
diffusion coefficients.
The two representations (1.4) and (1.5) are equivalent under mild mathemat-
ical conditions. Historically, the stochastic differential equations approach (1.4)
is due to Langevin, who in 1908 established the Langevin equation - a stochastic
differential equation; the deterministic partial differential equation approach (1.5)

is due to Einstein. The Langevin approach, equation (1.4), was studied mathe-
matically by Itô, who established Itô stochastic calculus. The Einstein approach,
equation (1.5), was studied mathematically by Fokker, Planck, and Kolmogorov.
It can be proven that the processes defined by equations (1.4) and (1.5) are dif-
fusion processes. A diffusion process is a Markov process with continuous sample
paths, which satisfies the following two conditions:
1
R
lim+ t−s |y−x|<ε
(y − x) p (x, t |y, s ) dy = µ(y, s)
t→s
1
R 2
lim t−s |y−x|<ε
(y − x) p (x, t |y, s ) dy = σ 2 (y, s) (1.6)
t→s+
∀ ∈> 0, s ≥ 0, x ∈ R
The two functions µ, σ 2 in (1.6) are the same as the drift and diffusion coefficients
in equations (1.4) and (1.5).
The diffusion equations (1.4) and (1.5) describe many important physical phe-
nomena, including Brownian motion. The Brownian motion is so called in honor
of the botanist Robert Brown who, in 1827, described the random motion of small
pollen grains suspended in a liquid. Brownian motion is due to random collisions
of the pollen grain with the liquid’s molecules. In 1905, Einstein introduced the
mathematical concepts that led to the Fokker-Planck equation. Einstein used
Brownian motion to prove the existence of atoms and molecules - a concept still
debated at the beginning of the 20th century. Diffusions are also used to describe,
at least approximately, the evolution of stock prices. The French mathematician
Louis Bachelier was the first, in 1900, to use diffusions to describe stock prices.
However, many physical processes as well as financial and economic processes
cannot be described by the diffusion equations (1.4) and (1.5). In fact, many
physical and financial processes are described by what are called anomalous dif-
fusions. In the chapters to follow we will discuss many financial processes that
can be represented as anomalous diffusions.
Let’s now consider the difference between normal and anomalous diffusions,
the key one of which is the mean displacement of the particle. If the drift and
diffusion coefficients do not depend on time, the variance of a normal diffusion
process grows proportionally to time:
V ar [Xt ] ∝ t (1.7)
An anomalous diffusion is characterized by a non linear growth of the variance
which typically follows a power law:
V ar [Xt ] ∝ tα . (1.8)
The different behavior of variance in function of time is not a marginal fea-
ture. Normal and anomalous diffusions are processes with different characteristics.
Normal diffusions are memoryless, Markovian processes; anomalous diffusions are
path-dependent, non Markovian processes with long-range dependence. Though
all diffusions have continuous, non differentiable sample paths, the fractal dimen-
sions of the paths of normal and anomalous diffusions are different.
Long-range dependence was first studied in hydrology by Hurst (1951). In a

monumental work that started in 1906 and lasted 62 years, Hurst documented
and described mathematically the long-range dependence properties of the water
level of the river Nile. His work was instrumental in the planning of the Aswan
High Dam project.
After the invention of fractals, a link was established between long-range mem-
ory, fractals, and self-similarity. A process Xt is called self-similar if there is a
constant H such that, for any scaling factor c, the process Xct and the process
cH Xt have the same distribution. A process is called H-ss self-similar if for any
d
constant c there is an H such that {Xct } = {cH Xt }.
Self-similarity has different causes. In 1968, Mandelbrot and Van Ness (1968)
described the fractional Brownian motion which is a Gaussian, self-similar pro-
cess with fractal paths, long-range memory, and stationary increments. However,
alpha-stable Lévy processes are self-similar processes with no memory. There-
fore, self-similarity does not imply long-range memory. There are also examples,
due to Cheridito (2004), which show that long-range memory does not imply
self-similarity.
We can now ask: How do we define fractional processes? What is the link
between long-range memory processes and fractional calculus? Can we establish
a theory of anomalous diffusions similar to that of normal diffusions with dual
equivalent descriptions in terms of stochastic differential equations and Fokker-
Planck equations?
To discuss these questions, we will look at two processes: fractional Brownian
motion and continuous-time random walks. The answer is only partially positive.
As we will see we can link continuous-time random walks with fractional partial
differential equations. We can also link fractional Brownian motions with frac-
tional partial differential equations. However, due to its non Markovian character,
there is no simple way to associate fractional Brownian motions with stochastic
differential equations.
A fractional Brownian motion – fBm - BtH with Hurst parameter 0<H<1, is a
Gaussian process with continuous paths with covariance:
1 2H 2H

E BtH BsH = s + t2H − |t − s|

2
An fBm becomes a standard Bm for H=0.5. It is a self-similar process with
index H.
A fractional Brownian motion has stationary increments. A process has station-
ary increments if the distribution of {Xt+h − Xt } is independent of t for any h. A
Brownian motion has independent stationary increments; a fractional Brownian
motion has stationary increments which are not independent.
2 2H
A fractional Brownian motion is an anomalous diffusion with E[BtH ] ∝ |t| .
It is a path-dependent, non Markovian process. A fractional Brownian motion is
not a semi-martingale, so the usual Itô stochastic calculus does not apply. That
is, it is not possible to define stochastic differential equations that describe a
fractional Brownian motion.
It is possible, however, to represent a fractional Brownian motion with a frac-

tional stochastic integral and it is possible to describe the evolution of the proba-
bility distribution of a fractional Brownian motion with a fractional equivalent of
the Fokker-Planck equation. These constructions will be described in the chapters
to follow.
Let’s now discuss continuous-time random walks. Following Scalas (2000) a
continuous-time random walk is a stochastic process xt that represents quite
naturally the evolution of logprices xt = log(St ). Prices, and therefore logprices,
are determined when trades occur. Trades occur at random times ti . The time
series of logprices (xti ) is characterized by the joint probability ϕ (ξ, τ ) of jumps
ξi = xti+1 − xti and waiting times between jumps τi = ti+1 − ti .
Let p (x, t) denote the probability density function of finding a value xt at
time t. Shlesinger and Montroll (1984) demonstrated that the Fourier-Laplace
transform p̃ (k, s) of p (x, t) obeys the following equation:
1 − ψ̃ (s) 1
p̃ (k, s) = (1.9)
s 1 − ϕ̃ (k, s)
where ψ̃ (s) is the Laplace transform of
Z Z ∞ Z +∞
ψ (τ ) = ϕ (ξ, τ ) dξ and ϕ̃ (k, s) = dt dxe−st+ikx p (x, t) .
0 −∞
Suppose now that the distribution of the jump size is independent from the dis-
tribution of waiting times: ϕ (ξ, τ ) = λ (ξ) ψ (τ ). Under this assumption, equation
(1.9) becomes:
1 − ψ̃ (s) 1
p̃ (k, s) =
s 1 − λ̃ (k) ψ̃ (s)
where λ̃ (k) is the Fourier transform of λ (ξ).
α
Let’s now make the further assumption that λ̃ (k) = exp (− |k| ) , 0 < α ≤
2 and that under these assumptions, λ̃ (k) is the characteristic function of an
alpha–stable distribution of index alpha. Scalas et al. (2000) demonstrate that
the following fractional partial differential equation holds:
∂ β p (x, t) ∂ α p (x, t) t−β
= α + δ (x) , t > 0
∂t β ∂ |x| Γ (1 − β)
Continuous-time random walks are non Markovian, long-range memory processes
which can be described by the fractional equivalent of the Fokker-Planck equation.
Continuous-time random walks do not have continuous paths as paths make
jumps. However, the mean squared displacement, that is the variance of the
process, does not grow linearly with time. Continuous time random walks have
therefore been proposed as a model of anomalous diffusion.
In the following chapters we will discuss in mathematical detail the properties
of fractional calculus and fractional processes and their applications in finance
and economics.
2
Fractional Calculus
Since the early 1960s, there have been a good number of papers related to heavy
tail distributions. These papers support the view that the heavy tail property is
a stylized fact about financial time series. Stable distributions have infinite vari-
ance, a property which is not found in empirical samples where empirical variance
does not grow with the size of the sample. As an example of the application of
fractional calculus, by extending diffusion equations to fractional order, a con-
nection between stable and tempered stable distribution with fractional calculus
can be made.
Because there are different methods for extending ordinary calculus to frac-
tional calculus, in this chapter we discuss the concepts and properties of the
most well-known definitions of fractional calculus and those that will be used in
this monograph.
This chapter is organized as follows. Some important definitions for fractional
calculus are discussed in Section 2.1. More specifically, details of the Riemann-
Liouville fractional derivative, Caputo fractional derivative, Grünwald-Letnikov
fractional derivative, and fractional derivative based on the Fourier transform are
discussed. Some examples for implementation of fractional derivatives in Matlab
are given in Section 2.2.
2.1 Different definitions for fractional derivatives

The derivative and integral operator are the inverse of each other. More precisely,
let Dn be a derivative of order n, then D−n is an integral operator of order n.
Figure 2.1 shows the possible choices for the derivative and integral operator in
the ordinary calculus.
In ordinary calculus, the possible number for the order of a derivative and
integral operator belongs to the integer numbers (such as shown in Figure 2.1),
while in fractional calculus the order of a derivative and an integral operator has
more flexibility. In fact, the order of a derivative and an integral can be fractional
(i.e., the order can be any real number).1
There are different approaches for defining a fractional derivative. More specif-
ically, an integral and a derivative operators based on the connection between
1 Even the order of a derivative and an integral operator can be a complex number, see Fallahgoul
(2013), Kilbas et al. (2006), Samko et al. (1993) and Podlubny (1998).
http://dx.doi.org/10.1016/B978-0-12-804248-9.50002-4, 12
2.1 Different definitions for fractional derivatives 13
Figure 2.1 Order of derivative or integral operator.
a derivative operator and other operators such as Fourier transform, Laplace

transform, n-fold integral operator, finite difference and so on can be extended
to upper dimensions. That is, let
Z x Z x1 Z xn−1
f(n) (x) = ··· f (xn−1 )dxn−1 · · · dx1 dx
a a a
Z x (2.1)
1
= (x − t)n−1 f (t)dt,
(n − 1)! a
and
dn
f (n) (x) = f (x),
dxn
where f(n) (x) and f (n) (x) are respectively an n-fold integral and a derivative of
order n. There are different approaches for presenting the functions f(n) (x) and
f (n) (x) in terms of f (x) and n, each approach leading to a definition for the
fractional derivative.2
Given our objective in this monograph, we limit our discussion to the Riemann-
Liouville, Caputo, Grünwald-Letnikov, and fractional integrals and derivatives
based on the Fourier transform.3 Bear in mind that there is a link between these
definitions.4
2.1.1 Riemann-Liouville Fractional Derivative

In this section, we begin with the definition for the Riemann-Liouville (RL) frac-
tional integrals and derivatives. Using this definition, the RL definition for the
fractional derivative is discussed. This definition is more general in terms of con-
taining other definitions. It comes from an n-fold integral operator.
2 See Samko et al. (1993), Kilbas et al. (2006), and Podlubny (1998), among others.
3 These definitions pass useful properties for practical problem and also other definitions can be
obtained from them. See Kilbas et al. (2006) and Podlubny (1998).
4 More details about these definitions can be found in Fallahgoul (2013), Samko et al. (1993), Kilbas
et al. (2006), and Podlubny (1998).
14 Fractional Calculus
Let I = [a, b] be a finite interval on the real axis R. The left-side and right-side
fractional integrals RL Iaα+ f and RL Ibα− f of order α ∈ C are defined by
Z x
1 f (t)dt
(RL Iaα+ f )(x) = , (x > a; Re(α) > 0) (2.2)
Γ(α) a (x − t)1−α
and
b
1 f (t)dt
Z
(RL Ibα− f )(x) = , (x < a; Re(α) > 0) (2.3)
Γ(α) x (t − x)1−α
where Γ(x) and Re(α) show the gamma function and imaginary part of α, re-
spectively. By setting n ∈ N in equations (2.2) and (2.3), we obtain
Z x
1
(RL Iaα+ f )(x) = (x − t)n−1 f (t)dt, (n ∈ N) (2.4)
(n − 1)! a
and
b
1
Z
(RL Ibα− f )(x) = (t − x)n−1 f (t)dt, (n ∈ N) (2.5)
(n − 1)! x
It should be stressed that equations (2.4) and (2.5) are equal to equation (2.1).
The left-side and right-side fractional derivatives RL Daα+ f and RL Dbα− f of order
α ∈ C are defined by
n
RL α d RL n−α

( Da+ f )(x) = Ia+ f (x)
dx
n Z x
1 d f (t)dt
= , (n = [Re(α)] = 1; x > a)
Γ(n − α) dx a (x − t)
α−n+1
and
d n RL n−α

RL
( Dbα− f )(x) = − Ib− f (x)
dx
d n b
Z
1 f (t)dt
= − , (n = [Re(α)] + 1; x < b)
Γ(n − α) dx x (t − x)
α−n+1
where [Re(α)] shows the integer part of Re(α).

Let n ∈ N, then (RL Da0+ f )(x) = (RL Db0− f )(x) = f (x), (RL Dan+ f )(x) = f (n) (x)
and (RL Db0− f )(x) = (−1)n f (n) (x).5
Remark Equation (RL Db0− f )(x) = (−1)n f (n) (x) for n 6∈ N does not hold.
Example 2.1 Let f (x) = c, where c is a constant number, I = [a, b] an arbitrary
p
finite interval on the real axes, and α = ∈ (0, 1) is a fractional number. The
q
left-side RL fractional derivative of f (x) of order α on interval I is calculated as
follows
5 More detailed information about different properties of the RL fractional derivative may be found in
Samko et al. (1993) and Kilbas et al. (2006).

RL d RL 1− pq
( Daα+ c)(x) = Ia+ c (x)
dx
Z x
1 d cdt
= p p , (n = [Re(α)] + 1 = 1; x > a)
Γ(1 − q ) dx a (x − t) q
p
!
c d (x − a)1− q
= ,
Γ(1 − pq ) dx 1 − pq
p
c(x − a)− q
= .
Γ(1 − pq )
Therefore, one important conclusion is that the RL fractional derivative of a
constant number is not zero. This property in fractional calculus is in contrast
to the property in ordinary calculus where the derivative of a constant function
is always zero.
2.1.2 Caputo Fractional Derivative

In this section, a definition for the Caputo (C) fractional derivative is given. The
C fractional derivative is defined based on the RL fractional derivative and the
Taylor series expansion. If the order of the derivative belongs to N, then the RL
and C fractional derivative are equal.
Let I = [a, b] be a finite interval on the real line R, α ∈ C(Re(α) ≥ 0) and n =
[Re(α)] + 1. The left-side and right-side C fractional derivatives are defined by
Z x n
f (n) (t)dt

C α
1 RL n−α d
Da+ f (x) = = Ia+ f (x),
Γ(n − α) a (x − t) α−n+1 dx
and
b n
f (n) (t)dt

1 d
Z
C RL n−α
( Dbα− f )(x) = = (−1)n Ib− f (x),
Γ(n − α) x (t − x)α−n+1 dx
6
respectively. In particular, when 0 < Re(α) < 1
Z x
C α
1 f 0 (t)dt RL n−α 0

Da+ f (x) = = Ia+ f (x),
Γ(n − α) a (x − t)α−n+1
and
b
1 f 0 (t)dt
Z
C RL n−α 0
Dbα− f )(x)

( = =− Ib− f (x).
Γ(n − α) x (t − x)α−n+1
The left-side and right-side C fractional derivatives can also be defined as
" n−1
#!
X f (k) (a)
C α
Da+ f (x) = RL Daα+ f (t) − (t − a)k

(x),
k=0
k!
6 In order for this definition to be well-defined, function f (x) must be almost continuous on [a, b]. For
detailed information about the almost continuous condition, see Samko et al. (1993) and Kilbas
et al. (2006), among others.
and
" n−1
#!
C
X f (k) (b)
Dbα− f RL
Dbα− (b − t)k

(x) = f (t) − (x),
k=0
k!
respectively.
Both the RL and C fractional derivatives are very common in applied areas.
However, in working with differential equations, the C fractional derivative is
more flexible. The reason for this attribute for the C financial derivative is related
to the initial conditions for solving differential equations: it is not necessary for
the initial conditions to be fractional.7
Example 2.2 Let f (x) = x, I = [a, b] be an arbitrary finite interval on the

p
real axes, and α = ∈ (0, 1) is a fractional number. The left-side C fractional
q
derivative of f (x) of order α on interval I is calculated as follows
x
1 dt
Z
C
Daα+ f

(x) = , (n = [Re(α)] = 1; x > a)
Γ(1 − α) a (x − t)α
p
!
1 d (x − a)1− q
= ,
Γ(1 − pq ) dx 1 − pq
p
(x − a)− q
= .
Γ(1 − pq )
2.1.3 Grünwald-Letnikov Fractional Derivative

In this section, we provide another definition for fractional derivative, the Grünwald-
Letnikov, named the GL fractional derivative.8
The usual definition for differentiation is
(∆nh f ) (x)
f (n) = lim , (2.6)
h−→0 hn
where (∆nh f ) (x) is the finite difference of order n for the function f (x) with the
step size h, and n ∈ N.9 The GL fractional derivative is obtained from equation
(2.6) by replacing α > 0 instead of n with the finite difference (∆nh f ) (x) replaced
by the fractional order difference (∆αh f ) (x) which is defined as
∞
!
k α
X
α
(∆h f ) (x) = (−1) f (x − kh), (x, h ∈ R; α > 0),
k=0
k
7 For more detailed information about solving the RL and C fractional differential equation see
Hashemiparast and Fallahgoul (2011a) and Hashemiparast and Fallahgoul (2011b), among others.
8 More detailed information of this definition may be found in Samko et al. (1993) and Kilbas et al.
(2006).
9 For more information about the finite difference, see Samko et al. (1993) and Podlubny (1998).
where !
α α(α − 1) · · · (α − k + 1)
= .
k n!
The left-side and right-side GL fractional derivatives are defined if h > 0 and
h < 0, respectively. That is, the left-side and right-side GL fractional derivative
of order α on finite interval I = [a, b] is defined by

α
∆h,a+ f (x)
GL α

Da+ f (x) = lim + ,
h−→0 hα
and
∆αh,b− f (x)
GL
Dbα− f (x) = lim−

,
h−→0 hα
respectively, where
[Xh ]
x−a !
α
∆αh,a+ f (x) = (−1)k

f (x − kh), (x ∈ R; h, α > 0),
k=0
k
and
[Xh ]
b−x !
α k α

∆h,b− f (x) = (−1) f (x + kh), (x ∈ R; h, α > 0).
k=0
k
2.1.4 Fractional derivative based on the Fourier transform

In this section, a definition for the fractional derivative based on the Fourier
transform is provided. This will be extremely useful in solving fractional differen-
tial equations, as well as providing a powerful tool for linking the characteristic
function of a random variable and a fractional differential equation.10
The relation between the Fourier transform and a derivative of order n(n ∈ N)
is as follows n
d f
F = (iω)n F {f } ,
dxn
where F represents the Fourier transform. By replacing n with a fractional num-
ber, i.e., α, a definition for the fractional derivative using the Fourier transform is
obtained. In other words, the definition of fractional derivative using the Fourier
transform is
F
Dxα f (x) = F−1 {(iω)α F {f }} ,

(2.7)
and
F α
f (x) = F−1 {(−iω)α F {f }},

D−x (2.8)
10 More detailed information about the connection between fractional differential equations and some
distributions is discussed in Fallahgoul et al. (2012b) and Fallahgoul et al. (2013).
where F−1 is the inverse of the Fourier transform. Representing the fractional
derivative using Fourier transform by equations (2.7) and (2.8) emphasizes the
fact that equation (2.9), in general, for fractional derivatives does not hold; that
is,
dn n d
n
= (−1) . (2.9)
dxn dxn
Remark This definition is an extension of the RL fractional derivative for an
infinite interval (−∞, ∞).
2.2 Computation with Matlab

In this section, we discuss implementing the theoretical results for fractional
calculus in Matlab.11
In order to calculate the RL fractional derivative with Matlab, we will use the
mfiles prepared by the Chebfun Team.12
We start with ordinary calculus. Command chebfun(f ) returns the chebfun
object for f, where f can be a string or function handle. Furthermore, command
diff(f ) is used for calculating the first derivative for the function f . The output
for the following code is presented in Figure 2.2.13
close all % close all windows;

clear all % reset Workspace history
clc % clear all command from Command Window
y = chebfun('sin(x)',[-2 2]); % calculate an approximation for sin(x)
y1 = diff(y); % calculate the first derivative
y2 = chebfun('-1*cos(x)',[-2 2]);
LW = 'LineWidth'; lw = 2; % width for the line of the plot
FS = 'FontSize'; fs = 14; % the size of font in title and label for plot
plot(y,'b',y1,'r',y2,'m',LW,lw) % plot y, y1 and y2 in the same window
legend('sin(x)','cos(x)','-cos(x)'), axis([-2 2 -2 2]), xlabel('x',FS,fs)
title('The function sin(x) with its derivative and antiderivative',FS,fs)
In the above derivative, the order of the derivative is 1 which is an integer

number. Now, we will obtain the RL fractional derivative for different fractional
order. The following codes calculate the RL fractional derivative for different
orders 0.1 : 0.01 : 1.14 The output of the code is presented in Figure 2.3.
y = chebfun('sin(x)',[-8 8]); % calculate an approximation for sin(x)

11 For more details about using Matlab see, Halpern et al. (2002) and Hunt et al. (2014), among others.
12 More detailed information about these mfiles may be founded in
http://www.mathworks.com/matlabcentral/fileexchange/23972-chebfun/content/chebfun/
examples/integro/html/FracCalc.html
13 More detailed information regarding the codes are presented in the Matlab code after sign %.
14 See Matlab help for detailed information about the command a : d : b
2.2 Computation with Matlab 19
Figure 2.2 The first derivative and integral of sin(x).
for alpha = 0.1:.2:1 % the order of RL fractional derivative

y = [ y diff(y(:,1),alpha) ]; % the RL derivative for order alpha
plot(y,LW,lw), drawnow
end
xlabel('x',FS,fs); ylabel('dâ sin(x) / d x â',FS,fs)
By changing the order of the derivative and function, we will get another plot.
Figure 2.4 shows the RL derivatives for cos(x) + sin(x).
y = chebfun('cos(x)*sin(x)',[-8 8]); % calculate an approximation for sin(x)

for alpha = 0.1:3:25 % the order of RL fractional derivative
y = [ y diff(y(:,1),sqrt(2)*alpha/17) ]; % calculating the RL derivative
plot(y,LW,lw), drawnow
end
xlabel('x',FS,fs); ylabel('dâ cos(x)+sin(x) / d x â',FS,fs)
By replacing the command cumsum(f ) rather than diff(f ) in the above codes,
one can obtain the RL fractional integral.
By comparing Figures 2.2, 2.3, and 2.4, one can see that the difference between
a function and its derivative can be substantial while in fractional calculus case
this may not be true.
Now, we compute the GL fractional derivative and integral.15 The output for
the following code is presented in Figure 2.5.

h = 0.01; % step size for order of derivative
t = -8:0.1:8;
y = cos(t);
order = 0:0.1:1;
yd = zeros( length(order), length(t) );
hold on
axis([0,100,-15,15])
for i=1:length(order)
yd(i,:) = fgl deriv( order(i), y, h );
plot(yd(i,:),LW,lw), drawnow
end
Key points of the chapter

• There are different ways for extending ordinary calculus to fractional calculus.
• The Riemann-Liouville, Caputo, and Grünwald-Letnikov fractional derivatives
are important approaches for extending ordinary calculus to fractional calculus.
• The Riemann-Liouville fractional derivative is the most important extension
of ordinary calculus.
• Almost all other definitions for the fractional derivative represent a special case
of the Riemann-Liouville fractional derivative.
• In contrast to the ordinary calculus, the fractional derivative of a constant is
not zero.
• In working with differential equation, the Caputo fractional derivative is more
flexible.
• For constructing a connection between a characteristic function of a random
variable and fractional calculus, fractional derivative based on the Fourier
transform is more flexible.
15 More detailed information about these mfiles may be found in

http://www.mathworks.com/matlabcentral/fileexchange/45982-fractional-derivative.
2.2 Computation with Matlab 21
Figure 2.3 The RL fractional derivatives for the sin(x) of order

a = 0, 0.1, ..., 0.9, 1.0.
Figure
√ 2.4 The RL fractional derivatives for the cos(x) + sin(x) of order
2 ∗ (0.1 : 3 : 25)
a= .
17
Figure 2.5 The RL fractional derivatives for the cos(x) of order

a = 0, 0.1, ..., 0.9, 1.0.
Another random document with
no related content on Scribd:
Miss Giles had a rare opportunity of showing her pupils how to
take a joke. She would have gained friends and lost no more prestige
than she did by trying to force an apology. A wholesome laugh with
the pupils is one of the best things to help overcome disrespect on
the part of the pupils. It would be better, of course, not to be obliged
to laugh at one’s own expense, too often. Supervised play solves
many problems like this one.
An apology unwillingly given is a lie or at best only a subterfuge.
No teacher can command respect by demanding it in so many words.
The teacher can compel respect only by showing her pupils that she
deserves it.
ILLUSTRATION (RURAL SCHOOL)
It was a rainy day at Mount Pleasant Mimicry of

Rural School. After the noon lunches had Mannerisms
been eaten the children were at a loss to decide what to play. Finally
Alice Mitchell said, “Let’s play school. Who’ll be the teacher? Who’ll
be the teacher?”
“Let me!” “Let me!” several of them almost yelled. Maud Jameson,
an overgrown girl, nine years old, was accustomed to having her way.
She was one of those positive children who win leadership by right of
having good opinions tersely expressed. Her older sister even
followed her lead.
Without more ado, she commanded the children to take their seats
and began a mock school day.
Miss Baldwin was at first scarcely interested in the children. Soon,
however, she was struck by Maud’s imitation of her own expressions.
Was it conscious or unconscious? She could scarcely tell. Would
Maud dare to mock her in her presence? She was not sure as to that.
At any rate she decided to study the situation, realizing that after this
noon time she need not again say:
“O wad some Power the giftie gie us

To see oursels as ithers see us.”
Maud passed along the seats making faultfinding comments as she
went.
“Laura, turn round,” she said, with exactly the touch of impatience
which Miss Baldwin herself would display.
“No indeed!” she answered to one who asked permission to speak,
with exactly the amount of sarcasm Miss Baldwin herself used on
similar occasions.
Maud rapped on her desk, and looked around frowning and
shaking her head as a signal to be more quiet—Miss Baldwin,
unmistakably. She tapped the bell for the children to stand together,
and stamped her foot as she told them to sit because some lagged.
“Whoever fails to get up this time may stay in at recess,” she
announced, with Miss Baldwin’s own expression of irritation.
For half an hour this went on. Maud scolded and sneered, stamped
her foot and found fault while Miss Baldwin listened with varying
feelings.
At first she decided to stop Maud and punish her. Yet she
considered that her explanation of the reason for her punishment
might be hard to make satisfactory. Her second thought was to study
the situation in order to ascertain whether the other children
considered it merely a joke on their teacher. They seemed not to do
so. Her next thought was of shame as she realized the atmosphere
created by her attitude toward the pupils as shown by Maud. She
therefore resolved to let the matter pass without criticism, but
meanwhile to profit by the picture given her of herself as teacher.
This resolve she kept, and as she learned to be patient, she saw less
and less need for impatience.
(2) Leaving the room. The first grade teacher should allow her
pupils to leave the room whenever they ask her. In case it becomes
an annoyance then is the time to study the matter carefully and apply
consistent methods. The things to be gained relative to pupils leaving
the school-room, are that they should leave and enter quietly and as
much unnoticed as possible; that they should not remain absent
from the room too long, and finally, that they do not abuse the
privilege by leaving oftener than necessary. The teacher must be very
judicious in withholding the privilege of leaving the room. The
physical condition of the child may be such as to require him to do so
often. If anywhere in school management the teacher needs to
practice common sense, it is in controlling pupils who leave the
school-room. Right habits should be established in the first grade. It
is difficult to keep children from abusing the privilege, and in their
anxiety to prevent abuses, teachers often use methods which arouse
the antagonism of the parents. With the first grade child the best
plan is to have a private talk with the child, explaining the necessity
of going quietly, of going as infrequently as possible, and of returning
as soon as possible. Be careful to express approval if the child heeds
your admonitions and repeat them when he forgets.
In the case of older pupils, who consciously take advantage of the
extended privilege, we suggest that you first attempt to gain the
confidence of the offending pupil. To do this, talk to him about his
own interests, show that you are interested in the very same
activities, sports, etc.
It is also a good plan to give some definite errand for the pupil to
do for you—something that he can easily do and will enjoy doing—
and after the child does it, show your appreciation by saying
something like this: “You are so kind. Thank you ever so much.” This
will help you in gaining the pupil’s confidence.
After securing this basis of confidence, make it a point to talk to
the pupil individually at some suitable time. Speak first about
something in which the child is interested, then say, “There is
another thing I wanted to speak to you about. Whenever you go out
at recess, be sure to get your drink and do all other errands before
the bell rings so that you will not need to leave during study hours
unless absolutely necessary. Try to remember this, will you?”
CASE 64 (THIRD GRADE)
Miss McLean, after a few days of exasperation over excessive

requests for permission to leave the room, finally decided to correct
this. She found in one day that every pupil left the room at least twice
during the session of school and this was a total of fifty requests.
“This will never do!” she said, the next Frequent
morning. “You must learn not to interrupt Absences
the school work this way. Now, I want you to see how well you can
keep to your work this morning. We will not give any permissions to
leave the room between now and recess and between recess and
noon time.” In the afternoon she relaxed somewhat. The next day
more permissions were granted, and finally the situation became as
bad as ever.
CONSTRUCTIVE TREATMENT
This effort at reform needs system. Adopt the simple rule that only
one person at a time will be given permission to leave the room. Ask
that each request be presented by first raising the hand. If your
pupils respond readily to your management you may sometimes
trust them to write the name on the board near the door instead of
asking permission vocally. This plan, however, is more suitable to the
high school, and even then supervision of the privilege must not be
relaxed.
If you do have pupils write their names on the blackboard, upon
their return, require them to note after their names the number of
minutes they were absent and let them make up this “lost time” at
intermission.
In case any pupil insistently leaves the room more often than you
would expect, institute an inquiry as to his physical health. Ask the
family physician or the mother for this information. In order to cut
off the bad effects of his example before the other pupils, you can
pass the word about, privately, that the doctor has asked you to give
Tom or Mary several interruptions of study during the day.
COMMENTS
It is easy to catalog the causes that lead to excessive attempts to

leave the classroom, study hall, or grade room—restlessness,
indolence, mischief-making, desire to play, conspiracy to meet
another pupil, carelessness in habits of nature, physical ill-health.
Trouble arises over this matter by careless management on the
part of teachers. Caution is necessary at two points: (1) Do not allow
too many interruptions of the work; (2) Do not injure the health of
pupils by refusing necessary privileges.
ILLUSTRATION (SIXTH GRADE)
In the Normal (Ill.) public schools there Simultaneous

were twelve rooms. Miss Haybarger had the Absences
sixth room. Soon after the opening of school in the fall, a most
obnoxious situation arose because from three to twelve pupils were
released continually. There were enough pupils out of the rooms to
meet on the grounds and indulge in games. Miss Haybarger decided
to save her pupils from this misdemeanor by insisting that only one
pupil leave the room at a time and that all “time lost” should be made
up. She reported that some days passed in which there was not a
single request for permission to leave the room.
This result can be further explained by the fact that every minute
of school time was filled with carefully planned and interesting work.
Her general manner made work and diligence the only possible order
of the day.
Epidemics of leaving the room are especially trying whenever a
substitute has charge of a room. If a regular teacher has good control
of his room he should send a note to the pupils, to be read to them by
the substitute, in which he says something like the following:
“I am sorry not to be with you today. Be even more considerate of
the substitute teacher than you have been toward me. I am expecting
a fine report from him as to your behavior today.”
This message will do much to stop irregularities. In case the
children are inclined to take advantage of the regular teacher, the
following case will be a helpful study.
ILLUSTRATION (EIGHTH GRADE)
A teacher who found that one of her brightest boys was setting a
bad example in this respect, dealt with it in a tactful way which
proved entirely successful. She was an excellent teacher, who trusted
her pupils very fully. They responded to this trust on the whole
admirably, but in one particular case her usual methods did not
work. She said nothing to the boy whose restlessness was causing the
trouble, but assuming that his frequent absences from the room were
caused by ill-health, she called on his mother and asked her to have
Robert’s health looked after. The mother promptly sent Robert to the
family physician, who made a careful examination but found nothing
wrong. All this to-do over his health, together with the trustful
anxiety of his mother and teacher, embarrassed Robert exceedingly.
He finally went to his teacher and told her that he was “now quite
well,” and that she would not be annoyed any more by his frequently
leaving the room. He was better than his word, for he stopped
leaving the room during the sessions altogether, and when he
stopped the other boys almost ceased also. Without having said a
word to any boy, without having shown them that she knew they
were indulging in a foolish and childish trick, the teacher had cured
the evil by dealing with the ringleader in a way that made him
ashamed of the quality of his leadership.
(3) Coughing epidemics. Often pupils indulge in epidemics of
coughing. One pupil begins, and by suggestion other pupils join in
the annoyance. The usual method of prevention is a scolding which
may arrest the outbreak but does not remove the tendency to repeat
itself. The very fact that the teacher notices the coughing intensifies
the suggestion.
It is to be understood that children often suffer from colds and
must cough. It would be cruelty to attempt to stop them. A better
way would be for the teacher to ask all the pupils to stand and take
several deep breaths and make some arm movements. The windows
must be opened to admit fresh air for the breathing and exercises.
The teacher can do this without the pupils having the slightest idea
that it was for the benefit of the pupil who coughed. In extreme cases
of coughing the teacher can go quietly to the pupil and ask him to
leave the room and take a drink. In most cases this will stop the
coughing. When coughing in the school-room is unavoidable, every
pupil should be taught how to cough into the handkerchief. The
article serves as a muffler for the sound and as a protection of one’s
neighbors against contagion.
It is quite worth while for the teacher to remember that the more
attention she pays to an outbreak of this kind, the more troublesome
it will prove to be, the oftener it will recur. One teacher who came
into a school in the middle of the term found that the pupils used
coughing outbreaks to annoy and worry their former teacher. They
tried the same on her. But much to their surprise she went right on
with her work and pretended that nothing unusual was going on. The
youngsters carried their outbreak to the limit of their capacities, still
the teacher went on unheedful of their efforts at annoying her. When
noon came she dismissed a band of worn-out youngsters. She had
won. They felt themselves outwitted. They did not try to annoy her
again.
Sometimes a pupil hiccoughs in a way to be annoying. While at
times hiccoughing can not be helped, still indiscreet teachers have
scolded pupils for it and thereby caused every pupil that could
hiccough to do it in a most annoying manner. Whenever a pupil
hiccoughs, a teacher may quietly ask the pupil to leave the room or
she can have the entire school stand and take several deep breaths.
This will usually cure hiccoughing. At the same time the windows
should be opened to admit fresh air.
(4) Giggling. Some pupils are addicted to “giggling.” In such cases
the teacher will find that to notice the annoyance will tend to
exaggerate it. If she can ignore it, the possibilities are that the
misdemeanor will cease. However, if it is so marked that it requires
her attention, the method applied must be indirect. It is quite certain
that if a teacher will persist in having a pupil that “giggles” do
something every time he indulges in the annoyance, he will be cured
of his trivial habit after a month or two.
Laughing in a proper way will hurt no one, and is by no means a
misdemeanor. It does children good to laugh and would sweeten the
lives of many soured teachers if they would laugh more. Often all the
pupils seem to want to laugh. The discreet teacher will let them have
their laugh; he will join with them. When the fun is over, he will say,
“Now let us all get busy.” If there is a tendency for the laughing to
become too boisterous, he may say pleasantly, “I like to see people
have fun, but if you will remember to laugh quietly when anything
funny happens, I shall appreciate it very much.”
CASE 65 (FIFTH GRADE)

Miss Mayne’s room was as still as a busy Giggling at
school-room can be, when a little crackling Nothing
giggle broke the stillness. Such a noise always stirred Miss Mayne,
who prided herself upon her discipline, as a fly stirs a light sleeper. It
affected her as a personal affront.
“Marian, what are you giggling about?”
“Nothing,” says Marian in a stifled voice.
“Don’t tell me that. What were you giggling about?”
“I don’t know. The other girls were, and I giggled, too.”
“Mattie, were you giggling?”
“Yes, ma’am, I s’pose I was. But I don’t know what I was giggling
about, either.”
“Well, then, I think I’d stop. I can’t see the sense in laughing about
nothing. Let’s have no more of it.”
Silence for a little while. Then a perfect gale of chirping, gurgling,
little-girl laughter—as cheerful a human sound as exists for the child-
lover, perhaps because of its very meaninglessness, its spontaneity,
its birth in healthy animal spirits. But Miss Mayne must uphold her
reputation as a disciplinarian. And this time she knows who started
the epidemic.
“Lulu, you began that giggling, didn’t you?”
“Yes, ma’am.”
“What is so funny?”
“I don’t know, Miss Mayne, truly I don’t. I just have the giggles.”
“I never heard of anything as senseless as this thing you call ‘the
giggles.’ You may come up here and stand in the corner until you get
over ‘the giggles.’”
Up to this time Lulu had been simply a lively little girl with
impulses under poor control; but at this punishment she became a
resentful one. At first she was inclined to turn around and make faces
at the other girls, but, as they were afraid to smile in appreciation,
this grew monotonous, and soon Lulu began to think of herself as
badly abused. She had never been taught at home that giggling is a
sin; she had an idea that she was very unjustly treated, and her sense
of fairness was outraged.
The next day Lulu, who was a prime favorite and a leader of the
girls, began systematic teasing of Miss Mayne. She persuaded the
other girls to annoy the teacher with a constant irritating succession
of coughs whenever she started to explain anything. Mattie was to
say that the room was too close, and when the windows had been
opened Muriel was to complain of the cold, and the rest were to join
in a storm of coughing. This program was carried out, and with great
success. Miss Mayne finally saw that she was being hectored, and
took revenge by standing three girls and one boy, who had joined in
the fun of his own accord, on the platform. Here they had great fun,
standing with grave faces, pretending to study, until a good chance
came to make a face at Miss Mayne. Lulu capped the climax by
asking Miss Mayne to put a cold compress upon her throat, as she
said this always relieved a cough for her. She folded a handkerchief
and dipped it into cold water, and Miss Mayne, looking into her
upturned pitiful face, did not know whether to forgive and pity her or
to shake her. She finally decided to shake her, which made Lulu
really sober for once and temporarily restored the peace.
Lulu was a good girl for several days after this, but when her high
spirits demanded another good time in school, she found similar
means of leading the other girls and boys into mischief. There was an
intermittent feud between her and Miss Mayne, in which the teacher
usually came out second best. Miss Mayne had to admit to herself
that although her school was sometimes as good as could be desired,
when Lulu wanted to she could lead the whole room into a
maddening course of annoyance that spoiled the order and spirit of
the day.
Natural leadership, a rare and valuable gift, is usually combined

with unusual ability of some kind or other, and is always carefully to
be reckoned with. When Miss Mayne found the girl who started the
giggling, she might have said to her:
“Lulu, have you found out something that is too funny to keep?
No? You are just giggling because you are giggling? That is too bad;
suppose you step out into the hall until you are over the attack;
perhaps it is too warm for you here.”
Assume that your pupil knows that people look with a certain
contempt upon causeless giggling, and explain why. Make clear how
important it is for people to be able to control their facial muscles,
their expression, their laughter; how absolutely necessary it often
becomes to be able to forego laughter. Then suggest some simple
exercises for the gaining of this control; and above all, show an
appreciation of the trouble a lively little girl has to control her
risibilities. Give her permission, if necessary, to step out of the room
when she feels an uncontrollable desire to giggle; usually being alone
helps to control the spasm. If possible, interest this leader, with her
wealth of spontaneity and high spirits, in some enterprise in which
she may use all her surplus energy.
Step out into the hall and ask Lulu solicitously if she has recovered
from her fit of giggling; probably she will be ready to step to her seat
and go on with her work quietly. If she is not, make her comfortable
in the hall, and tell her to wait after school for a little talk. You are
not punishing her in doing this; you are trying to cure her of a
disease, to help her gain a control which she has not so far
accomplished.
COMMENTS
By treating the meaningless giggling as a disease, for which kind

words and a remedy are appropriate, it becomes less desirable in the
eyes of the girls; it is like a headache or a cold. With the leader
removed and no irritating opposition on the part of the teacher, the
giggling will soon die down.
This attitude is not a pretense on the teacher’s part. The truth is
that spontaneous giggling is sometimes a sign of serious nervous
trouble, and suggests the need of a specialist’s care. Oftener,
however, it is simply the sign of poor nervous control, and can be
overcome by a little wise and kind guidance.
An epidemic of giggling becomes as irresistible to a group of little
girls, and often to big ones as well, as an epidemic of measles. They
do not know how to control it, and if they think it is going to tease
the teacher, they probably do not want to. The suggestion of the need
of control, the friendly helpfulness in proposing means of gaining
this control, and the readiness to allow legitimate laughter when it
occurs, all remove the idea of wrongdoing, blame, and antagonism.
There is no longer any fun in giggling to annoy the teacher; she is not
annoyed, she becomes sympathetic, and the teaser becomes
conscious that something is wrong with herself.
When the laughing first breaks out, however, and everything
seems funny to the pupils for the time being, then is a good time for
the teacher to say something funny too and thereby associate herself
with the pleasure the children are having. The fact of having indulged
them in their merriment for a moment will give her greater power to
stop them when the laugh is over.
Sometimes, too, an epidemic of laughing comes merely as a
reaction from a long continued period of study. It should not be
treated as an offense in such a case, but rather as a symptom of
fatigue.
ILLUSTRATION (SECOND GRADE)
Unusual silence reigned in Miss Grey’s Laughing

room one Friday afternoon, for she had Permitted
allowed the children as a special treat for Friday to have a period of
their favorite pastime, paper-weaving. With absorbed attention they
had worked out their own designs and little Teddie Hendricks, in his
eagerness to show his teacher what a wonderful figure he had made,
could not persuade himself to wait until she could come to him; he
must go to her. His older sister had carelessly left her geography on
Teddie’s desk and he had been using it as a sort of framework for his
design. A pile of unused strips of paper lay on one side of the
geography. He picked up the geography upon which both the paper
mat and the strips of paper lay and started for his teacher. When
about half way across the floor a sudden gust of wind from the open
window caught his papers and sent them flying in all directions. With
a puzzled look Teddy stared first at the bare geography which he held
in his hands, then at his teacher, and then burst out laughing.
“Well, Teddie, Mr. Wind is having some fun as well as you, isn’t
he?” asked Miss Grey. “Never mind, we’ll pick them up.”
But the charm which held the room in silence was broken. One
giggle after another was heard from time to time and presently Miss
Grey said:
“Children, you have worked so beautifully this afternoon, we’ll all
have a little fun together. Teddie may get the bean bags and we’ll
have a little game of catch. Girls in this row! Boys in that one! Let’s
see how many can catch without once dropping!”
Ten minutes of substitution of one activity for another cured the
giggles and the rested children went quietly back to work with no
further attacks for the remainder of the afternoon.
(5) Chewing gum. Frequently some teacher is heard to say that his
pupils annoy him by chewing gum. They even go so far as to chew
rubber or even paper and when told by the teacher to throw away
their gum innocently remark, “I have no gum, it’s only paper.”
Whenever such an annoyance exists it is largely due to the
indiscretion of the teacher. The trouble with too many teachers is
that they denounce the chewing of gum as an evil, making it out as a
sin, when in truth, it may be beneficial to many and often such
teachers use it themselves when their pupils do not see them. Is it
any wonder pupils worry them by chewing gum during school and
finish up by sticking it to the under sides of their desks?
How much better it would be for the teacher consistently to
explain to pupils that there really are benefits to be derived
sometimes from chewing gum, and that when at play or out-of-doors
there is no harm in it, but that in company, in school or in church, it
is not a neat thing to do. Such a teacher has told the truth and her
pupils, large and small, will respect and appreciate her for it and they
will do more; they will not annoy her by chewing gum during school
sessions. The habit is largely a matter of suggestion and imitation.
One pupil introduces the custom, the others follow out the
suggestion. By relegating the custom to the school ground, when the
pupils are busy with physical activities of other sorts, the practice will
be reduced to a minimum.
CASE 66 (EIGHTH GRADE)

Miss Smith came from the State Normal School to have charge of
the two upper grades after forming some very definite ideas on how
to maintain order among adolescent boys.
The second morning she was conducting Gum Chewing
an arithmetic lesson when she found that
Susie Hall was enjoying her chewing gum more than she did the
assignment.
“What is your name?” said Miss Smith, pointing somewhat
definitely toward the offending pupil.
“I am Susie Hall.”
“Well, Susie, are you interested at all in this work in arithmetic? I
could hardly believe it since I see your jaws going” (mocking Susie in
a very exaggerated fashion).
Susie was just a little surprised to have her manners noted so
keenly and commented on so quickly, and replied, “Yes’m. I guess I
like arithmetic.”
“Well, we can’t have this gum chewing, and you can just step away
from the blackboard and find some place to throw out your chewing
gum. When that is done, come back and we will see what we can do
with this arithmetic.”
Now Susie was only one of a dozen who in former days had more
or less privilege in the matter of gum chewing, so that there was a
sympathetic wave of resentment quickly resounding throughout the
room.
Nevertheless, there was no immediate outbreak of anger from
Susie or anyone else in the room.
Instead of immediately attempting to suppress the gum chewing in

a child almost totally a stranger, go across the room, and, after
asking Susie’s name, summon her to you, and very quietly ask her to
put away her gum. After doing that, request Susie to help you in
keeping good order. The chances are that a girl like her would be
more or less bold and dominating among her associates, so that if a
feeling of goodwill toward her teacher could be developed, it would
be a valuable asset in maintaining the order of the room
subsequently.
COMMENTS
Miss Smith transgressed seriously in making so bold an attack

upon the existing situation. She did not yet know the past habits of
her pupils, so that discretion should have restrained her from being
so brusque and outspoken in her attitude.
ILLUSTRATION (SEVENTH GRADE)
Mr. Franklin took charge of the Ellsworth Helping to Keep

grammar room and found that his Good Order
predecessor had been extremely indifferent in the matter of eating
sweetmeats and gum chewing during school hours. This knowledge
came to him by reason of the remains that he found in the teacher’s
desk from the year preceding. This disclosure led him to expect
several of the pupils’ desks to show the same state of affairs; indeed,
he found additional proofs that eating and chewing gum in the
school-room were entirely customary among the pupils.
Subsequently, the first instance which came to his notice received
definite attention.
Ellison Perkins chanced to be the offending pupil. Mr. Franklin
waited until recess, called Ellison to his desk, and made some inquiry
based upon his suspicions as to the custom of the pupils and teacher
during the past year. Ellison slowly made admissions that gave the
teacher thorough knowledge of the situation.
“Now,” said Mr. Franklin, “I suppose that you and the rest of the
pupils in our room do not believe that chewing gum during the
school hours is the proper thing for well-trained pupils.”
“No, I suppose not,” said Ellison; “leastwise in some places they
say that we shouldn’t eat in school, and now and then teacher gave us
a mighty talking to, but he didn’t stop us.”
“Well,” said Mr. Franklin, “we can’t do that way this year. I want to
be sure of what you think is right about the matter, and if you are
willing to help me keep this room clean, and help the pupils to see
what is right about matters of this sort, I shall be very much obliged
to you. We can’t stand anything that interrupts our work
unnecessarily. Of course, we don’t intend to work every minute, but
if we lose a few minutes now and then for such things as gum
chewing, it takes too much time.”
“Yes, I know,” said Ellison, with more intelligence than eagerness,
since he recalled that during the morning he had himself revived the
old habit; nevertheless, Mr. Franklin aroused the conviction that he
was right. His appeal to do the right thing was successful and even
though in a somewhat frail fashion, he linked up Ellison in the plan
of reform.
(6) Eating in school. Many a first grade child has been caught by
the teacher eating some morsel of food, a bit of candy, or an apple
during school hours. Such a practice can scarcely be called a
misdemeanor. It is only childish nature manifesting itself. Some
teachers say that no child should be punished or even reprimanded
in the slightest manner for eating something in school. The first
thing a teacher should do when she discovers a little child trying to
satisfy his hunger, is to give him a knowing smile and a negative nod
of the head. He probably will put the tempting morsel away. Should
he get it again, the teacher can walk to the offender’s desk and take
the food away. Should this habit become troublesome, the teacher
may require all the pupils to leave their eatables at a certain place in
the school-room. A little tact and patience will keep in check the
tendency to eat things in school. It is a breach of good manners; it is
a childish trait and should be treated as such. Its chief harm lies in
the fact that if the act is unchecked, other children through
suggestion and imitation will soon be following the example.
CASE 67 (SECOND GRADE)
Miss Shannon was in the middle of the Eating Candy

forenoon’s work when she noted Alice
surreptitiously munching candy. Her question, “What are you
doing?” brought a useless “Nothing.” Stepping back to Alice’s desk
she found a little girl with mouth crowded full of candy, hiding
additional stores in her ill-concealed handkerchief.
“Where did this come from?”
“Eliza gave it to me,” was the response.
“Is it possible! Eliza, have you any more candy?”
“Yes, ma’am. I have more, but not much. I haven’t eaten any in
school time.”
“Well, I want to see it. My, what a lot! I sometimes forget and take
a bite of something to eat in school myself. I’ll tell you what let’s do.
We all like candy. Eliza, won’t you pass the candy to all of us?”
“This won’t give a taste to us all. I’ve got so little,” was Eliza’s
natural response.
“Well, let’s do it anyway. Then we’ll be through with it quickly.”
The plan was actually carried out. Pieces were passed from hand to
hand and each child was supposed to break off a bit and pass on the
lump. In about five minutes the eating was over and work was taken
up again.
There seems to be a breakdown of discipline in this case where a

surrender to appetite is unnecessary. Require Eliza and Alice to
deposit their sweetmeats with you, on the ground that you will help
them to be polite to other pupils who have no candy. After school is
out in the afternoon, restore to them their property with a mild
caution as to good manners. If the offense is repeated, keep the
candy till the second night. Commend them for their self-control in
waiting.
COMMENTS
Miss Shannon exceeded the bounds of propriety in proposing to

eat in school hours contrary to her own rule. She should by no means
confess that she could not control her own appetite; such admissions
induce children to yield to their own impulses.
This habit of eating in school is natural and likely to appear, but
excessive severity is not necessary to overcome it.
ILLUSTRATION
Not many weeks later Miss Shannon had Sweetmeats

occasion to treat the same situation again.
Following better judgment, she said to the offender,
“Would you please let me have your sweetmeats to keep until you
need them?” There was some hesitation, but her calm assurance of
good will won.
“Now you can come to me after school is out and I’ll give you what
you leave with me. But please don’t bring your sweet things into the
room. Eat them up before school begins or save them for lunch.”
She took the occasion to say to all:
“Our papas and mammas keep plenty to eat at home, so that we
need not eat food during school hours. I want you to help each pupil
in the room to have a profitable time. We can’t do it if someone is
eating. So we won’t bring anything to eat during study time. If
anybody forgets, he is to leave his eatables with me until it seems
best to give them back to him.”
CASE 68 (FIFTH GRADE)
Georgiana Luitivieder’s parents sent her Eating Oranges

occasional express packages of fruit from
Florida during the mid-winter months. She was the only child in her
grade whose parents spent the winter south; hence she could not
resist the temptation to take fruit to school the next day after a case
of lovely oranges came fresh from the trees.
A whole dozen was scattered among the members of her grade.
The first signs were the yellow adornments that bedecked a few
desks; one or two fell to the floor and rolled away. At the same time
Abigail was seen eating an orange on the sly. Miss Galdsworthy was
much annoyed by the troublesome oranges. Here are her orders:
“Abigail, bring your orange and lay it on my desk.”... “All in this
row, who have oranges, bring them to me.”... “And in this row.”...
“The one who brought these oranges to school may stand.” “Very
well, Georgiana, I want to see you at recess. Now, Henry, you may
call the janitor for me.” When the janitor came he received orders to
take the oranges away and not to give them back to the children. He
marched off with a basket full amid groans and protesting
exclamations from all over the room. (After his departure), “I should
think you would know better than to bring all those oranges into the
school-room. I don’t want this ever to happen again.”
Having found out who had distributed the oranges by private

inquiry, call Georgiana to you and say:
“I want you to collect all these oranges and keep them for a
‘spread’; they are lovely things, but they’ll be in our way if we keep
them lying around. You are going to help me keep order, aren’t you?
And I’ll help you to have a good time.”
Then announce to the school:
“We’ve decided to have our oranges in a delightful ‘spread’ to come
off at the recess period. So we must gather up the oranges for that
occasion.”
Promise some additions to their resources and program, and make
a splendid thing out of it.
COMMENTS
Pupils are hopelessly alienated by a procedure that exceeds the

bounds of propriety. Georgiana’s generous impulses were outraged
by loss threatened or actual of the luscious fruit. A teacher on the
ground before school opened would have found out what was about
to happen, in all likelihood, and could have forestalled it entirely. But
if the teacher directs these generous impulses, she will not only avoid
school-room disturbances, but she will be taken yet more intimately
into the confidence of her pupils.
ILLUSTRATION (SIXTH GRADE)
“‘You used to eat once in a while in Peanuts

school’! I can’t believe it,” said Miss
Arbuthnot, the first time she caught one fifth-grader munching a
peanut. “We don’t eat in school when I teach. I’ll tell you what we’ll
do. Let’s make a rule that no one shall take a bite or chew a single
chew when school is in session, but instead of that we will have our
girls prepare us on Friday noon a light lunch, once a month. How
many of you favor that? Hands up!”
All agreed, and each child brought a small contribution from
home. The luncheon was daintily served in the domestic science
room and constituted a fine safety valve for several strong impulses
in the hearts of thirty-five sixth-grade children.
CASE 69 (HIGH SCHOOL)
Murry Blane found three young women Caramels in

among his schoolmates in high school that School
he felt very warmly toward. Having an abundance of pocket money,
he spent many dollars first and last in bringing tokens of his regard
to his three friends. For the most part he managed to do this quietly,
so that his devotion was not subject to discipline, but when Charles
Wingate became principal, things took a slightly different turn.
Mr. Wingate knew very well that there were always pairings off of
young folks in high school. He watched for these groupings of the
boys and girls, and when he saw Emma Moore laying a row of
caramels on her desk the first question that came to him was, “Who
bought the candy for this girl?” He immediately went to her desk and
quietly asked the question, “Emma, where did this candy come
from?” Such a question had never been put to her before, although
efforts had been made many times to eliminate lunching from the
high school.
Her first answer was, “Why, friends of mine bought them for me.
Isn’t that all right?”
Of course the neighboring pupils heard the answer and knew what
the question was and consequently their interest was very deeply
aroused.
“O, yes,” said Mr. Wingate, “it is all right for your friends to buy
you candy, but it is unusual to see it displayed in this fashion as if it
were for sale.”
“Yes, I wouldn’t offer that candy for sale. It is too precious for
that.”
Following this witty speech, Mr. Wingate saw that the concern of
other students was becoming too intense and gave up further
remarks for the time being, but an hour later when the matter of
having the candy had apparently been dismissed from his mind, he
found the time to say to the girl, “We don’t want that candy display to
continue, nor do we want any more of it brought into the assembly
room. I want you to tell me who else shares with you this abominable
habit of bringing stuff to eat to school.”
Emma hardly knew what to say, but managed to frame an answer:
“Why, I don’t know who brings stuff to eat. Everyone brings what he
wants, or doesn’t bring anything, just as he likes.”
“Does Murry bring candy to the girls?”
“Maybe he does,” said Emma. “Why don’t you ask him?”
“I shall ask whom I find necessary to interview, but I am asking
you whether he brought candy and gave it to you or not.”
“Well,” said Emma, “several of my friends bring candy, both boys
and girls. Perhaps Murry brought some. I wouldn’t say that he
didn’t.”
Evidently the interview was not going to be satisfactory, and so Mr.
Wingate said, “Well, that will do for now.”
In high school it is necessary to steer a safe course between

suppression of legitimate pleasures and attacks on ill-mannered
customs made half-heartedly because of dread of colliding with
school sentiment. Mr. Wingate should not have attempted so broad
an inquiry in so public a manner. It would have been quite sufficient
for the moment if he had said, “Emma, will you please conceal this
candy until later? It is too attractive to be safe.”

Fractional Calculus and Fractional Processes With Applications To Financial Economics: Theory and Application 1st Edition Fabozzi

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Fractional Calculus and Fractional Processes With Applications To Financial Economics: Theory and Application 1st Edition Fabozzi

Uploaded by

Copyright:

Available Formats

Fractional Calculus and Fractional

Processes with Applications to

The Fractional Trigonometry: With Applications to

Handbook of Fractional Calculus with Applications Vol 2

Intelligent numerical methods Applications to

Generalized Fractional Calculus: New Advancements and

Handbook of Fractional Calculus with Applications Vol 1

Fractional Dynamic Calculus and Fractional Dynamic

Handbook of Fractional Calculus with Applications

Functional Numerical Methods: Applications to Abstract

Library of Congress Cataloging-in-Publication Data

British Library Cataloguing in Publication Data

For information on all Academic Press publications

Publisher : Nikki Levy

Typeset by SPi Global, India

Sergio M. Focardi is a professor of finance, director of the Master’s course in

Frank J. Fabozzi is a professor of finance at EDHEC Business School (Nice,

1 Fractional calculus and fl'actional processes: an overview 3

3 Fractional Brownian Motion 23

4 Fractional Diffusion and Heavy Tail Distribution s: Stable

5 Fractiona l Diffusion and Heavy Tail Distribution s: Geo-Stable

6 Fractional Pru,tial Differential Equation and Option Pricing 59

7 Continuous-T ilne RandOll1 Walk and Fractional Calculus 81

8 Applications of Fractional Processes 91

2.1 Derivative or integral operator 13

Fractional calculus and fractional processes:

and anomalous diffusions? There is indeed a deep relationship insofar as the

1.1 Fractional calculus

A function F (x) is called an antiderivative (or primitive function) of f (x) if:

the same iterative process

1.2 Fractional processes

1. direct description of fractional processes, especially fractional Brownian mo-

However, we will see that there is no simple duality of representations as in the

differential equation; the deterministic partial differential equation approach (1.5)

Long-range dependence was first studied in hydrology by Hurst (1951). In a

It is possible, however, to represent a fractional Brownian motion with a frac-

2.1 Different definitions for fractional derivatives

Figure 2.1 Order of derivative or integral operator.

a derivative operator and other operators such as Fourier transform, Laplace

2.1.1 Riemann-Liouville Fractional Derivative

where [Re(α)] shows the integer part of Re(α).

2.1.2 Caputo Fractional Derivative

Example 2.2 Let f (x) = x, I = [a, b] be an arbitrary finite interval on the

2.1.3 Grünwald-Letnikov Fractional Derivative

2.1.4 Fractional derivative based on the Fourier transform

2.2 Computation with Matlab

close all % close all windows;

In the above derivative, the order of the derivative is 1 which is an integer

y = chebfun('sin(x)',[-8 8]); % calculate an approximation for sin(x)

Figure 2.2 The first derivative and integral of sin(x).

for alpha = 0.1:.2:1 % the order of RL fractional derivative

y = chebfun('cos(x)*sin(x)',[-8 8]); % calculate an approximation for sin(x)

LW = 'LineWidth'; lw = 2; % width for the line of the plot

Key points of the chapter

15 More detailed information about these mfiles may be found in

Figure 2.3 The RL fractional derivatives for the sin(x) of order

Figure 2.5 The RL fractional derivatives for the cos(x) of order

ILLUSTRATION (RURAL SCHOOL)

It was a rainy day at Mount Pleasant Mimicry of

“O wad some Power the giftie gie us

CASE 64 (THIRD GRADE)

Miss McLean, after a few days of exasperation over excessive

It is easy to catalog the causes that lead to excessive attempts to