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2015•Basic Sciences Journal of Textile UniversitiesRequires access

Vulnerable option pricing in sub-fractional Brownian motion environment

Heng Xia

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Abstract

Sub-fractional Brownian motion model is employed to the vulnerable option pricing.Assume that stock price and corporate value obey the stochastic differential equation driven by sub-fractional Brownian motion,the vulnerable option pricing model in sub-fractional Brownian motion environment is established.Using the stochastic analysis of the fractional Brownian motion and the method of actuarial mathematics,the pricing formula for vulnerable option is obtained by sub-fractional Brownian motion.

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What this paper is about

Sub-fractional Brownian motion model is employed to the vulnerable option pricing.Assume that stock price and corporate value obey the stochastic differential equation driven by sub-fractional Brownian motion,the vulnerable option pricing model in sub-fractional Brownian motion environment is established.Using the stochastic analysis of the fractional Brownian motion and the method of actuarial mathematics,the pricing formula for vulnerable option is obtained by sub-fractional Brownian motion.

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Available abstract

Sub-fractional Brownian motion model is employed to the vulnerable option pricing.Assume that stock price and corporate value obey the stochastic differential equation driven by sub-fractional Brownian motion,the vulnerable option pricing model in sub-fractional Brownian motion environment is established.Using the stochastic analysis of the fractional Brownian motion and the method of actuarial mathematics,the pricing formula for vulnerable option is obtained by sub-fractional Brownian motion.

Key concepts: Fractional Brownian motion, Geometric Brownian motion, Diffusion process, Brownian motion, Brownian excursion, Valuation of options, Mathematics, Stochastic differential equation

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