THE VALUATION OF EUROPEAN OPTION UNDER SUBDIFFUSIVE FRACTIONAL BROWNIAN MOTION OF THE SHORT RATE-Reference-Cited by-同舟云学术

THE VALUATION OF EUROPEAN OPTION UNDER SUBDIFFUSIVE FRACTIONAL BROWNIAN MOTION OF THE SHORT RATE

Published:2020-06 Issue:04 Volume:23 Page:2050022
ISSN:0219-0249
Container-title:International Journal of Theoretical and Applied Finance
language:en
Short-container-title:Int. J. Theor. Appl. Finan.

Author:

SHOKROLLAHI FOAD¹

Affiliation:

1. Department of Mathematics and Statistics, University of Vaasa, P. O. Box 700, Vaasa FIN-65101, Finland

Abstract

In this paper, we propose an extension of the Merton model. We apply the subdiffusive mechanism to analyze European option in a fractional Black–Scholes environment, when the short rate follows the subdiffusive fractional Black–Scholes model. We derive a pricing formula for call and put options and discuss the corresponding fractional Black–Scholes equation. We present some features of our model pricing model for the cases of [Formula: see text] and [Formula: see text].

Publisher

World Scientific Pub Co Pte Lt

Subject

General Economics, Econometrics and Finance,Finance

Link

https://www.worldscientific.com/doi/pdf/10.1142/S0219024920500223

Reference20 articles.

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