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Option Pricing in a Fractional Brownian Motion Environment

Author

Listed:
  • Cipian Necula

    (Faculty of Finance and Banking, Bucharest University of Economics)

Abstract

The purpose of this paper is to obtain a fractional Black-Scholes formula for the price of an option for every t in [0,T], a fractional Black-Scholes equation and a risk-neutral valuation theorem if the underlying is driven by a fractional Brownian motion BH (t), 1/2

Suggested Citation

  • Cipian Necula, 2008. "Option Pricing in a Fractional Brownian Motion Environment," Advances in Economic and Financial Research - DOFIN Working Paper Series 2, Bucharest University of Economics, Center for Advanced Research in Finance and Banking - CARFIB.
    • Handle: RePEc:cab:wpaefr:2
    as

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    File URL: http://www.dofin.ase.ro/Working%20papers/Ciprian%20Necula/opfbm.pdf
    File Function: First version, 2008
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    More about this item

    Keywords

    fractional Brownian motion; fractional Black-Scholes market; quasiconditional expectation;
    All these keywords.

    JEL classification:

    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

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