Pricing European option with transaction costs under the fractional long memory stochastic volatility model

Xiao-Tian Wang, Min Wu, Ze-Min Zhou and Wei-Shu Jing

Physica A: Statistical Mechanics and its Applications, 2012, vol. 391, issue 4, 1469-1480

Abstract: This paper deals with the problem of discrete time option pricing using the fractional long memory stochastic volatility model with transaction costs. Through the ‘anchoring and adjustment’ argument in a discrete time setting, a European call option pricing formula is obtained.

Keywords: Anchoring-adjustment; Reference point effect; Delta-hedging; Scaling; Transaction costs (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:391:y:2012:i:4:p:1469-1480

DOI: 10.1016/j.physa.2011.11.014

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