Paper Title:
European Option Pricing under Fractional Stochastic Interest Rate Model
  Abstract

Under the assumption of stock price and interest rate obeying the stochastic differential equation driven by fractional Brownian motion, we establish the mathematical model for the financial market in fractional Brownian motion setting. Using the risk hedge technique, fractional stochastic analysis and PDE method, we obtain the general pricing formula for the European option with fractional stochastic interest rate. By choosing suitable Hurst index, we can calibrate the pricing model, so that the price can be used as the actual price of option and control the risk management

  Info
Periodical
Advanced Materials Research (Volumes 171-172)
Edited by
Zhihua Xu, Gang Shen and Sally Lin
Pages
787-790
DOI
10.4028/www.scientific.net/AMR.171-172.787
Citation
W. L. Huang, G. M. Liu, S. H. Li, A. Wang, "European Option Pricing under Fractional Stochastic Interest Rate Model", Advanced Materials Research, Vols. 171-172, pp. 787-790, 2011
Online since
December 2010
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