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European Option Pricing In The Generalized Mixed Weighted Fractional Brownian Motion

Author

Listed:
  • 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)

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.

Suggested Citation

  • Feng Xu & Miao Han, 2024. "European Option Pricing In The Generalized Mixed Weighted Fractional Brownian Motion," FRACTALS (fractals), World Scientific Publishing Co. Pte. Ltd., vol. 32(04), pages 1-6.
    • Handle: RePEc:wsi:fracta:v:32:y:2024:i:04:n:s0218348x24400309
    DOI: 10.1142/S0218348X24400309
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