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Pricing model for equity warrants in a mixed fractional Brownian environment and its algorithm

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  • Xiao, Wei-Lin
  • Zhang, Wei-Guo
  • Zhang, Xili
  • Zhang, Xiaoli

Abstract

This paper deals with the problem of pricing equity warrants in a mixed fractional Brownian environment. Based on the quasi-conditional expectation and the Fourier transform, we present the pricing model for equity warrants. Moreover, a hybrid intelligent algorithm, which is based on the Genetic Algorithm, is employed to solve the nonlinear optimization problem. The performance of our model and the proposed algorithm have been illustrated with some numerical examples.

Suggested Citation

  • Xiao, Wei-Lin & Zhang, Wei-Guo & Zhang, Xili & Zhang, Xiaoli, 2012. "Pricing model for equity warrants in a mixed fractional Brownian environment and its algorithm," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 391(24), pages 6418-6431.
    • Handle: RePEc:eee:phsmap:v:391:y:2012:i:24:p:6418-6431
    DOI: 10.1016/j.physa.2012.07.041
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