Risk preference based option pricing in a fractional Brownian market

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Risk preference based option pricing in a fractional Brownian market

Rostek, Stefan; Schöbel, Rainer
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URI: http://nbn-resolving.de/urn:nbn:de:bsz:21-opus-21835
http://hdl.handle.net/10900/47471
Dokumentart: WorkingPaper
Date: 2006
Source: Tübinger Diskussionsbeiträge der Wirtschaftswissenschaftlichen Fakultät ; 299
Language: English
Faculty: 6 Wirtschafts- und Sozialwissenschaftliche Fakultät
Department: Wirtschaftswissenschaften
DDC Classifikation: 330 - Economics
Keywords: Brownsche Bewegung
Other Keywords:
Fractional Brownian motion , Conditional expectation , Risk preference based option pricing , Fractional option pricing , Fractional Greeks
License: http://tobias-lib.uni-tuebingen.de/doku/lic_ohne_pod.php?la=de http://tobias-lib.uni-tuebingen.de/doku/lic_ohne_pod.php?la=en
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Abstract:

We focus on a preference based approach when pricing options in a market driven by fractional Brownian motion. Within this framework we derive formulae for fractional European options using the traditional idea of conditional expectation. The obtained formulae – as well as further results – accord with classical Brownian theory and confirm economic intuition towards fractional Brownian motion. Furthermore the influence of the Hurst parameter H on the price of a European option will be analyzed.

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