Journal of Applied Mathematics

Asian Option Pricing with Transaction Costs and Dividends under the Fractional Brownian Motion Model

Yan Zhang, Di Pan, Sheng-Wu Zhou, and Miao Han

Full-text: Open access

Abstract

The pricing problem of geometric average Asian option under fractional Brownian motion is studied in this paper. The partial differential equation satisfied by the option’s value is presented on the basis of no-arbitrage principle and fractional formula. Then by solving the partial differential equation, the pricing formula and call-put parity of the geometric average Asian option with dividend payment and transaction costs are obtained. At last, the influences of Hurst index and maturity on option value are discussed by numerical examples.

Article information

Source
J. Appl. Math., Volume 2014 (2014), Article ID 652954, 8 pages.

Dates
First available in Project Euclid: 2 March 2015

Permanent link to this document
https://projecteuclid.org/euclid.jam/1425305634

Digital Object Identifier
doi:10.1155/2014/652954

Mathematical Reviews number (MathSciNet)
MR3191133

Zentralblatt MATH identifier
07010709

Citation

Zhang, Yan; Pan, Di; Zhou, Sheng-Wu; Han, Miao. Asian Option Pricing with Transaction Costs and Dividends under the Fractional Brownian Motion Model. J. Appl. Math. 2014 (2014), Article ID 652954, 8 pages. doi:10.1155/2014/652954. https://projecteuclid.org/euclid.jam/1425305634


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