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@article{2422850,
author = {Araneda, Axel A.},
article_location = {SINGAPORE},
doi = {http://dx.doi.org/10.1142/S0219477524500603},
keywords = {Multifractional Brownian motion; Hurst exponent; long-range dependence; European option pricing},
language = {eng},
issn = {0219-4775},
journal = {FLUCTUATION AND NOISE LETTERS},
title = {A multifractional option pricing formula},
url = {https://www.worldscientific.com/doi/epdf/10.1142/S0219477524500603},
year = {2024}
}
TY - JOUR
ID - 2422850
AU - Araneda, Axel A.
PY - 2024
TI - A multifractional option pricing formula
JF - FLUCTUATION AND NOISE LETTERS
PB - WORLD SCIENTIFIC PUBL CO PTE LTD
SN - 02194775
KW - Multifractional Brownian motion
KW - Hurst exponent
KW - long-range dependence
KW - European option pricing
UR - https://www.worldscientific.com/doi/epdf/10.1142/S0219477524500603
N2 - 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.
ER -
ARANEDA, Axel A. A multifractional option pricing formula. \textit{FLUCTUATION AND NOISE LETTERS}. SINGAPORE: WORLD SCIENTIFIC PUBL CO PTE LTD, 2024, 11 s. ISSN~0219-4775. Dostupné z: https://dx.doi.org/10.1142/S0219477524500603.
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