EUROPEAN OPTION PRICING IN THE GENERALIZED MIXED WEIGHTED FRACTIONAL BROWNIAN MOTION

Feng Xu and Miao Han
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Feng Xu: School of Business, Suzhou Vocational University, 215104, Suzhou, P. R. China
Miao Han: School of Mathematics, China University of Mining and Technology, 221116, Xuzhou, P. R. China

FRACTALS (fractals), 2024, vol. 32, issue 04, 1-6

Abstract: In order to describe the self-similarity and long-range dependence of financial asset prices, this paper adopts a new fractional-type process, i.e, the generalized mixed weighted fractional Brownian motion to describe the dynamic change process of risky asset prices. A European option pricing model driven by the generalized mixed weighted fractional Brownian motion is constructed, and explicit solutions to the pricing formulas of European call options and European put options are derived by using the arbitrage-free pricing theory. Finally, through numerical simulation, the influence of the parameter on the option price is analyzed.

Keywords: Generalized Mixed Weighted Fractional Brownian Motion; Arbitrage-Free Pricing Theory; Option Pricing; Numerical Analysis (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1142/S0218348X24400309

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