Option pricing with fractional volatility
Other Condensed Matter
2008-12-02 v1 Statistical Mechanics
Pricing of Securities
Abstract
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.
Keywords
Cite
@article{arxiv.cond-mat/0404684,
title = {Option pricing with fractional volatility},
author = {Rui Vilela Mendes and Maria Joao Oliveira},
journal= {arXiv preprint arXiv:cond-mat/0404684},
year = {2008}
}
Comments
17 pages Latex, 2 figures