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2008•Shuxue de shijian yu renshiRequires access

The Pricing Formulas of Exotic Options in a Fractional Brownian Motion

Suo Xin-li

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Abstract

By applying equivalent martingale measure,the purpose of this paper is to obtain pricing formulas for some exotic options including power option,capped option,if the underlying is driven by a Fractional Brownian Motion.We will compare our results with the classical results based on standard Brownian Motion.And we conclude that standard Brownian Motion is an especial case of Fractional Brownian Motion.Then the classical pricing model of option can be generalized,which is based on Fractional Brownian Motion.

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What this paper is about

By applying equivalent martingale measure,the purpose of this paper is to obtain pricing formulas for some exotic options including power option,capped option,if the underlying is driven by a Fractional Brownian Motion.We will compare our results with the classical results based on standard Brownian Motion.And we conclude that standard Brownian Motion is an especial case of Fractional Brownian Motion.Then the classical pricing model of option can be generalized,which is based on Fractional Brownian Motion.

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Available abstract

By applying equivalent martingale measure,the purpose of this paper is to obtain pricing formulas for some exotic options including power option,capped option,if the underlying is driven by a Fractional Brownian Motion.We will compare our results with the classical results based on standard Brownian Motion.And we conclude that standard Brownian Motion is an especial case of Fractional Brownian Motion.Then the classical pricing model of option can be generalized,which is based on Fractional Brownian Motion.

Key concepts: Fractional Brownian motion, Martingale representation theorem, Brownian motion, Mathematics, Brownian excursion, Martingale (probability theory), Geometric Brownian motion, Reflected Brownian motion

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