✦ LIBER ✦

Option pricing with regulated fractional Brownian motion

✍ Scribed by Aldabe, F. ;Barone-Adesi, G. ;Elliott, R. J.

Publisher: John Wiley and Sons
Year: 1998
Tongue: English
Weight: 101 KB
Volume: 14
Category: Article
ISSN: 8755-0024
DOI: 10.1002/(sici)1099-0747(199812)14:4<285::aid-asm363>3.0.co;2-r

No coin nor oath required. For personal study only.

✦ Synopsis

Standard and fractional Brownian motions are known to be unsatisfactory models of asset prices. A new class of continuous-time stochastic processes, RFBM, is proposed to remedy some of the shortcomings of current models. RFBM lead to valuation formulas similar to Black}Scholes, but with volatility increasing with time to maturity. The arbitrage problem of fractional Brownian motion is removed.

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