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Risk preference based option pricing in a fractional Brownian market

  • Rostek, Stefan
  • Schöbel, Rainer
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    We focus on a preference based approach when pricing options in a market driven by fractional Brownian motion. Within this framework we derive formulae for fractional European options using the traditional idea of conditional expectation. The obtained formulae - as well as further results - accord with classical Brownian theory and con?rm economic intuition towards fractional Brownian motion. Furthermore the in?uence of the Hurst parameter H on the price of a European option will be analyzed.

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    File URL: http://econstor.eu/bitstream/10419/40337/1/558782035.pdf
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    Paper provided by University of Tübingen, School of Business and Economics in its series Tübinger Diskussionsbeiträge with number 299.

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    Date of creation: 2006
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    Handle: RePEc:zbw:tuedps:299
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