A note on the use of fractional Brownian motion for financial modeling

S. Rostek and R. Schöbel

Economic Modelling, 2013, vol. 30, issue C, 30-35

Abstract: In the second part of the past decade, the usage of fractional Brownian motion for financial models was stuck. The favorable time-series properties of fractional Brownian motion exhibiting long-range dependence came along with an apparently insuperable shortcoming: the existence of arbitrage. Within the last two years, several new models using fractional Brownian motion have been published. However, still the problem remains unsolved whether such models are reasonable choices from an economic perspective.

Keywords: Fractional Brownian motion; Wick-Itô calculus; Fractional Stratonovich calculus; Dynamic incompleteness; Option pricing (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (25)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:30:y:2013:i:c:p:30-35

DOI: 10.1016/j.econmod.2012.09.003

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