Pricing of Perpetual American Put Option with Sub-Mixed Fractional Brownian Motion

Pricing of Perpetual American Put Option with Sub-Mixed Fractional Brownian Motion

The pricing problem of perpetual American put options is investigated when the underlying asset price follows a sub-mixed fractional Brownian motion process. First of all, the sub-mixed fractional Black-Scholes partial differential equation is established by using the delta hedging method and the pr...

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Veröffentlicht in:Fractional calculus & applied analysis 2019-08, Vol.22 (4), p.1145-1154
Hauptverfasser: Xu, Feng, Zhou, Shengwu
Format: Artikel
Sprache:eng
Schlagworte:
60H10
90A06
Abstract Harmonic Analysis
Analysis
Brownian motion
Free boundaries
Functional Analysis
Integral Transforms
Mathematics
Operational Calculus
option pricing
Partial differential equations
perpetual American option
Pricing
pricing models
Pricing policies
Put & call options
Research Paper
sub-mixed fractional Brownian motion
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Zusammenfassung:The pricing problem of perpetual American put options is investigated when the underlying asset price follows a sub-mixed fractional Brownian motion process. First of all, the sub-mixed fractional Black-Scholes partial differential equation is established by using the delta hedging method and the principle of no arbitrage. Then, by solving the free boundary problem, we get the pricing formula of the perpetual American put option.
ISSN:1311-0454
1314-2224
DOI:10.1515/fca-2019-0060