Continuous time Black-Scholes equation with transaction costs in subdiffusive fractional Brownian motion regime |
| |
Authors: | Jun Wang Jin-Rong LiangLong-Jin Lv Wei-Yuan QiuFu-Yao Ren |
| |
Institution: | a Department of Mathematics, Fudan University, Shanghai 200433, Chinab Department of Mathematics, East China Normal University, Shanghai, 200241, China |
| |
Abstract: | In this paper, we study the problem of continuous time option pricing with transaction costs by using the homogeneous subdiffusive fractional Brownian motion (HFBM) Z(t)=X(Sα(t)), 0<α<1, here dX(τ)=μX(τ)(dτ)2H+σX(τ)dBH(τ), as a model of asset prices, which captures the subdiffusive characteristic of financial markets. We find the corresponding subdiffusive Black-Scholes equation and the Black-Scholes formula for the fair prices of European option, the turnover and transaction costs of replicating strategies. We also give the total transaction costs. |
| |
Keywords: | Subdiffusion Black-Scholes formula Fractional Black-Scholes equation Transaction costs |
本文献已被 ScienceDirect 等数据库收录! |
|