A multifractional option pricing formula

Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F00216224%3A14560%2F24%3A00136756" target="_blank" >RIV/00216224:14560/24:00136756 - isvavai.cz</a>
Result on the web
<a href="https://www.worldscientific.com/doi/epdf/10.1142/S0219477524500603" target="_blank" >https://www.worldscientific.com/doi/epdf/10.1142/S0219477524500603</a>
DOI - Digital Object Identifier
<a href="http://dx.doi.org/10.1142/S0219477524500603" target="_blank" >10.1142/S0219477524500603</a>

Result language
angličtina
Original language name
A multifractional option pricing formula
Original language description
Fractional Brownian motion has become a standard tool to address long-range dependence in financial time series. However, a constant memory parameter is too restrictive to address different market conditions. Here, we model the price fluctuations using a multifractional Brownian motion assuming that the Hurst exponent is a time-deterministic function. Through the multifractional Ito calculus, both the related transition density function and the analytical European Call option pricing formula are obtained. The empirical performance of the multifractional Black-Scholes model is tested by calibration of option market quotes for the SPX index and offers best fit than its counterparts based on standard and fractional Brownian motions.
Czech name
—
Czech description
—

Type
J<sub>imp</sub> - Article in a specialist periodical, which is included in the Web of Science database
CEP classification
—
OECD FORD branch
50206 - Finance

Project
—
Continuities
I - Institucionalni podpora na dlouhodoby koncepcni rozvoj vyzkumne organizace

Publication year
2024
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Similar results(10)