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    Fractional black-scholes models: complete mle with application to fractional option pricing

    152629_28490_Misiran_Lu_Teo_ ICOCO.pdf (212.0Kb)
    Access Status
    Open access
    Authors
    Misiran, Masnita
    Lu, Z.
    Teo, Kok Lay
    Date
    2010
    Type
    Conference Paper
    
    Metadata
    Show full item record
    Citation
    Misiran, Masnita and Lu, Zudi and Teo, Kok Lay. 2010. Fractional black-scholes models: complete mle with application to fractional option pricing, in Xu, H. and Yang, X. and Wei, W. (ed), The International Conference on Optimization and Control 2010, Jul 18 2010, pp. 573-586. Guiyang, China: Guiyang University.
    Source Title
    Proceedings of the International Conference on Optimization and Control 2010
    Source Conference
    Proceedings of the International Conference on Optimization and Control 2010
    School
    Department of Mathematics and Statistics
    URI
    http://hdl.handle.net/20.500.11937/37460
    Collection
    • Curtin Research Publications
    Abstract

    Geometric fractional Brownian motion (GFBM) is an extended model of the traditional geometric Brownian motion that is widely used for Black-Scholes option pricing. By considering GFBM, we are now able to capture the memory dependency. This method will enable us to derive the estimators of the drift, μ, volatility, !2, and also the index of self similarity, H, simultaneously. This will enable us to use the fractional Black-Scholes model with all the needed parameters. Simulation outcomes illustrate that our methodology is efficient and reliable. Empirical application to stock exchange index with option pricing under GFBM is also made.

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