European Option Pricing Problems with Fractional Uncertain Processes

Gang Shi and Jinwu Gao

Chaos, Solitons & Fractals, 2021, vol. 143, issue C

Abstract: Compared to canonical Liu processes, fractional Liu processes possess the property of long memory which makes them more flexible in modeling stock prices. This paper calculates the moments of a fractional Liu process and the expected value of a geometric fractional Liu process. It derives some pricing formulas of the European options with the stock as underlying asset whose price is assumed to follow a geometric fractional Liu process. Algorithms are designed to compute the option prices based on the pricing formulas, and numerical experiments are performed to verify the effectiveness of the algorithms.

Keywords: Fractional process; Uncertain process; Option pricing formula; Uncertain finance (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:chsofr:v:143:y:2021:i:c:s0960077920309978

DOI: 10.1016/j.chaos.2020.110606

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