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A fractional version of the Cox–Ingersoll–Ross interest rate model and pricing double barrier option with Hurst index H∈(23,1)

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  • Somayeh Fallah
  • Ali Reza Najafi
  • Farshid Mehrdoust

Abstract

In this work, we study the existence and uniqueness of the solution to a fractional version of the Cox–Ingersoll–Ross (fCIR) stochastic differential equation. The strong convergence of this equation is analyzed and according to it’s framework, we obtain the price of the double barrier option under transaction cost. Finally, we verify the effect of the parameters of the model on the value of the option.

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  • Somayeh Fallah & Ali Reza Najafi & Farshid Mehrdoust, 2019. "A fractional version of the Cox–Ingersoll–Ross interest rate model and pricing double barrier option with Hurst index H∈(23,1)," Communications in Statistics - Theory and Methods, Taylor & Francis Journals, vol. 48(9), pages 2254-2266, May.
    • Handle: RePEc:taf:lstaxx:v:48:y:2019:i:9:p:2254-2266
    DOI: 10.1080/03610926.2018.1464580
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    Cited by:

    1. Ascione, Giacomo & Mehrdoust, Farshid & Orlando, Giuseppe & Samimi, Oldouz, 2023. "Foreign Exchange Options on Heston-CIR Model Under Lévy Process Framework," Applied Mathematics and Computation, Elsevier, vol. 446(C).

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