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

Yan Zhang | Zendy; Di Pan | Zendy; Zhou Sheng-wu | Zendy; Miao Han | Zendy

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

Author(s) -

Yan Zhang,

Di Pan,

Zhou Sheng-wu,

Miao Han

Publication year - 2014

Publication title -

journal of applied mathematics

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 0.307

H-Index - 43

eISSN - 1687-0042

pISSN - 1110-757X

DOI - 10.1155/2014/652954

Subject(s) - asian option , fractional brownian motion , geometric brownian motion , mathematics , transaction cost , arbitrage , valuation of options , partial differential equation , hurst exponent , mathematical economics , dividend , mathematical finance , econometrics , economics , brownian motion , financial economics , mathematical analysis , finance , statistics , diffusion process , economy , service (business)

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

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