Pricing Study on Two Kinds of Power Options in Jump-Diffusion Models with Fractional Brownian Motion and Stochastic Rate - Applied Mathematics

AM > Vol.5 No.16, September 2014

Volume 5, Issue 16 (September 2014)

ISSN Print: 2152-7385 ISSN Online: 2152-7393

Google-based Impact Factor: 0.58 Citations

Pricing Study on Two Kinds of Power Options in Jump-Diffusion Models with Fractional Brownian Motion and Stochastic Rate ()

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DOI: 10.4236/am.2014.516234 3,181 Downloads 3,900 Views Citations

Author(s)

Jin Li, Kaili Xiang, Chuanyi Luo

Affiliation(s)

School of Economic Mathematics, Southwestern University of Finance and Economics, Chengdu, China.

ABSTRACT

In this paper, under the assumption that the exchange rate follows the extended Vasicek model, the pricing of the reset option in FBM model is investigated. Some interesting themes such as closed-form formulas for the reset option with a single reset date and the phenomena of delta of the reset jumps existing in the reset option during the reset date are discussed. The closed-form formulae of pricing for two kinds of power options are derived in the end.

KEYWORDS

Stochastic Rate, Fractional Jump-Diffusion Process, Fractional Brown Motion, Power Option

Share and Cite:

Li, J. , Xiang, K. and Luo, C. (2014) Pricing Study on Two Kinds of Power Options in Jump-Diffusion Models with Fractional Brownian Motion and Stochastic Rate. Applied Mathematics, 5, 2426-2441. doi: 10.4236/am.2014.516234.

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