Option pricing with fractional volatility

Details Option pricing with fractional volatility Option pricing with fractional volatility

2004-04-28

arxiv.org/abs/cond-mat/0404684v1

Physics

Condensed Matter

Other Condensed Matter

17 pages Latex, 2 figures

Scientific paper

Based on empirical market data, a stochastic volatility model is proposed
with volatility driven by fractional noise. The model is used to obtain a
risk-neutrality option pricing formula and an option pricing equation.

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