Fractional Brownian motion, random walks and binary market models
AbstractWe prove a Donsker type approximation theorem for the fractional Brownian motion in the case $H>1/2.$ Using this approximation we construct an elementary market model that converges weakly to the fractional analogue of the Black-Scholes model. We show that there exist arbitrage opportunities in this model. One such opportunity is constructed explicitly.
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Bibliographic InfoArticle provided by Springer in its journal Finance and Stochastics.
Volume (Year): 5 (2001)
Issue (Month): 3 ()
Note: received: October 1999; final version received: August 2000
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Web page: http://www.springerlink.com/content/101164/
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- C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
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