Risk preference based option pricing in a fractional Brownian market

Stefan Rostek and Rainer Schöbel

No 299, Tübinger Diskussionsbeiträge from University of Tübingen, School of Business and Economics

Abstract: We focus on a preference based approach when pricing options in a market driven by fractional Brownian motion. Within this framework we derive formulae for fractional European options using the traditional idea of conditional expectation. The obtained formulae - as well as further results - accord with classical Brownian theory and con?rm economic intuition towards fractional Brownian motion. Furthermore the in?uence of the Hurst parameter H on the price of a European option will be analyzed.

Keywords: Fractional Brownian motion; Conditional expectation; Risk preference based option pricing; Fractional option pricing; Fractional Greeks (search for similar items in EconPapers)
JEL-codes: G13 (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (15)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:tuedps:299

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