Asian option pricing under sub-fractional vasicek model
This paper investigates the pricing formula for geometric Asian options where the underlying asset is driven by the sub-fractional Brownian motion with interest rate satisfying the sub-fractional Vasicek model. By applying the sub-fractional $ {\rm{It\hat o}} $ formula, the Black-Scholes (B-S) type...
| Main Authors: | , , , |
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| Format: | Article |
| Language: | English |
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AIMS Press
2023-08-01
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| Series: | Quantitative Finance and Economics |
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| Online Access: | https://www.aimspress.com/article/doi/10.3934/QFE.2023020?viewType=HTML |
| _version_ | 1797657935846834176 |
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| author | Lichao Tao Yuefu Lai Yanting Ji Xiangxing Tao |
| author_facet | Lichao Tao Yuefu Lai Yanting Ji Xiangxing Tao |
| author_sort | Lichao Tao |
| collection | DOAJ |
| description | This paper investigates the pricing formula for geometric Asian options where the underlying asset is driven by the sub-fractional Brownian motion with interest rate satisfying the sub-fractional Vasicek model. By applying the sub-fractional $ {\rm{It\hat o}} $ formula, the Black-Scholes (B-S) type Partial Differential Equations (PDE) to Asian geometric average option is derived by Delta hedging principle. Moreover, the explicit pricing formula for Asian options is obtained through converting the PDE to the Cauchy problem. Numerical experiments are conducted to test the impact of the stock price, the Hurst index, the speed of interest rate adjustment, and the volatilities and their correlation for the Asian option and the interest rate model, respectively. The results show that the main parameters such as Hurst index have a significant influence on the price of Asian options. |
| first_indexed | 2024-03-11T17:51:43Z |
| format | Article |
| id | doaj.art-2ea3e37cf8fa4760b9c4f7894d4a847c |
| institution | Directory Open Access Journal |
| issn | 2573-0134 |
| language | English |
| last_indexed | 2024-03-11T17:51:43Z |
| publishDate | 2023-08-01 |
| publisher | AIMS Press |
| record_format | Article |
| series | Quantitative Finance and Economics |
| spelling | doaj.art-2ea3e37cf8fa4760b9c4f7894d4a847c2023-10-18T03:07:02ZengAIMS PressQuantitative Finance and Economics2573-01342023-08-017340341910.3934/QFE.2023020Asian option pricing under sub-fractional vasicek modelLichao Tao 0Yuefu Lai 1 Yanting Ji2Xiangxing Tao31. School of Engineering Cost, Zhejiang College of Construction, Hangzhou 311231, P. R. China2. School of Information and Electronic Engineering, Zhejiang University of Science and Technology, Hangzhou 310023, P. R. China3. Department of Mathematics and Statistics, Zhejiang University of Science and Technology, Hangzhou 310023, P. R. China3. Department of Mathematics and Statistics, Zhejiang University of Science and Technology, Hangzhou 310023, P. R. ChinaThis paper investigates the pricing formula for geometric Asian options where the underlying asset is driven by the sub-fractional Brownian motion with interest rate satisfying the sub-fractional Vasicek model. By applying the sub-fractional $ {\rm{It\hat o}} $ formula, the Black-Scholes (B-S) type Partial Differential Equations (PDE) to Asian geometric average option is derived by Delta hedging principle. Moreover, the explicit pricing formula for Asian options is obtained through converting the PDE to the Cauchy problem. Numerical experiments are conducted to test the impact of the stock price, the Hurst index, the speed of interest rate adjustment, and the volatilities and their correlation for the Asian option and the interest rate model, respectively. The results show that the main parameters such as Hurst index have a significant influence on the price of Asian options.https://www.aimspress.com/article/doi/10.3934/QFE.2023020?viewType=HTMLsub-fractional brownian motionvasicek modelzero-coupon bondasian option pricing |
| spellingShingle | Lichao Tao Yuefu Lai Yanting Ji Xiangxing Tao Asian option pricing under sub-fractional vasicek model Quantitative Finance and Economics sub-fractional brownian motion vasicek model zero-coupon bond asian option pricing |
| title | Asian option pricing under sub-fractional vasicek model |
| title_full | Asian option pricing under sub-fractional vasicek model |
| title_fullStr | Asian option pricing under sub-fractional vasicek model |
| title_full_unstemmed | Asian option pricing under sub-fractional vasicek model |
| title_short | Asian option pricing under sub-fractional vasicek model |
| title_sort | asian option pricing under sub fractional vasicek model |
| topic | sub-fractional brownian motion vasicek model zero-coupon bond asian option pricing |
| url | https://www.aimspress.com/article/doi/10.3934/QFE.2023020?viewType=HTML |
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