Time-changed geometric fractional Brownian motion and option pricing with transaction costs

This paper deals with the problem of discrete time option pricing by a fractional subdiffusive Black–Scholes model. The price of the underlying stock follows a time-changed geometric fractional Brownian motion. By a mean self-financing delta-hedging argument, the pricing formula for the European call option in discrete time setting is obtained.

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Year of publication:	2012
Authors:	Gu, Hui ; Liang, Jin-Rong ; Zhang, Yun-Xiu
Published in:	Physica A: Statistical Mechanics and its Applications. - Elsevier, ISSN 0378-4371. - Vol. 391.2012, 15, p. 3971-3977
Publisher:	Elsevier
Subject:	Option pricing \| Transaction costs \| Delta-hedging \| Time-changed process \| Inverse α-stable subordinator

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Type of publication:	Article
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10011058124