On the Solution of Fractional Option Pricing Model by Convolution Theorem

Autor: C. Olunkwa, B. O. Osu, C. N. Obi, A. I. Chukwunezu
Rok vydání: 2019
Předmět:
Zdroj: Earthline Journal of Mathematical Sciences. :143-157
ISSN: 2581-8147
Popis: The classical Black-Scholes equation driven by Brownian motion has no memory, therefore it is proper to replace the Brownian motion with fractional Brownian motion (FBM) which has long-memory due to the presence of the Hurst exponent. In this paper, the option pricing equation modeled by fractional Brownian motion is obtained. It is further reduced to a one-dimensional heat equation using Fourier transform and then a solution is obtained by applying the convolution theorem.
Databáze: OpenAIRE