Option Pricing in a Fractional Brownian Motion Environment

The objective of this report is actually to get a fractional Black-Scholes formula for the cost of an option for for each t in [0,T], a fractional Black-Scholes equation plus risk-neutral valuation theorem if the underlying is led by a fractional Brownian motion BH (t), 1/2 < H < 1.

Simply because of this aim we’ll 1st prove a few results about the quasi-conditional expectation, particularly the behaviour to a Girsanov transform. We’ll additionally analyze our final results with the traditional findings based on the standard Brownian motion and we conclude that when it comes to the fractional Brownian motion the price of the option no more is dependent on only on T – t

Source: Bucharest University of Economics,

Download URL 2: Visit Now

Option Pricing in a Fractional Brownian Motion Environment