Advanced Search
MyIDEAS: Login to save this article or follow this journal

Options With Underlying Asset Driven By A Fractional Brownian Motion: Crossing Barriers Estimates

Contents:

Author Info

  • GIULIA ROTUNDO

    ()
    (Department of Business, Technological and Quantitative Studies, Faculty of Economics, University of Tuscia, via del Paradiso 47, 01100 Viterbo, Italy; Department of Economic and Financial Institutions, University of Macerata, Via Crescimbeni, 20-62100 - Macerata, Italy)

  • ROY CERQUETI

    ()
    (Department of Economic and Financial Institutions, University of Macerata, Via Crescimbeni, 20-62100 - Macerata, Italy)

Abstract

This paper aims at supplying a decision support system tool to investors having options written on an underlying asset driven by a fractional Brownian motion (fBm). The results presented here rely on the theory of nonlinear transformations of fBm and provide the calculus of the probability estimate that the underlying asset crosses nonlinear barriers. Recent results stating a Black and Scholes-like pricing formula for fBm monitor the expected behaviour of options on the basis of the dynamics of the underlying asset. We rely on the results drawn for plain vanilla options, leaving their extension to barrier options for future work. The theory of speculative bubbles due to endogenous causes provides a useful suggestion for the detection of periods in which these results should be used. The application of the above results is shown through the NASDAQ case study.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.worldscinet.com/cgi-bin/details.cgi?type=pdf&id=pii:S1793005710001633
Download Restriction: Access to full text is restricted to subscribers.

File URL: http://www.worldscinet.com/cgi-bin/details.cgi?type=html&id=pii:S1793005710001633
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by World Scientific Publishing Co. Pte. Ltd. in its journal New Mathematics and Natural Computation.

Volume (Year): 06 (2010)
Issue (Month): 01 ()
Pages: 109-118

as in new window
Handle: RePEc:wsi:nmncxx:v:06:y:2010:i:01:p:109-118

Contact details of provider:
Web page: http://www.worldscinet.com/nmnc/nmnc.shtml

Order Information:
Email:

Related research

Keywords: Option pricing; barriers; fractional Brownian motion; Hermite rank; long memory property;

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:wsi:nmncxx:v:06:y:2010:i:01:p:109-118. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Tai Tone Lim).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.