Salvato in:
| Autore principale: | |
|---|---|
| Natura: | Preprint |
| Pubblicazione: |
2023
|
| Soggetti: | |
| Accesso online: | https://arxiv.org/abs/2303.16314 |
| Tags: |
Aggiungi Tag
Nessun Tag, puoi essere il primo ad aggiungerne!!
|
| _version_ | 1866910546228412416 |
|---|---|
| author | Araneda, Axel A. |
| author_facet | Araneda, Axel A. |
| contents | 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. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2303_16314 |
| institution | arXiv |
| publishDate | 2023 |
| record_format | arxiv |
| spellingShingle | A multifractional option pricing formula Araneda, Axel A. Mathematical Finance 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. |
| title | A multifractional option pricing formula |
| topic | Mathematical Finance |
| url | https://arxiv.org/abs/2303.16314 |