Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
468164 | Computers & Mathematics with Applications | 2013 | 8 Pages |
Abstract
In this paper, we investigate option valuation problems under the fractional Black–Scholes model. The aim is to propose a pricing formula for the European option with transaction costs, where the costs structure contains fixed costs, a cost propositional to the volume traded, and a cost proportional to the value traded. Precisely, we provide an approximate solution of the nonlinear Hoggard–Whalley–Wilmott equation. The comparison results reveal that our approximate solutions are close to the numerical computations. Moreover, the comparison results demonstrate that the price of the European option decreases as the Hurst exponent increases.
Related Topics
Physical Sciences and Engineering
Computer Science
Computer Science (General)
Authors
Hsuan-Ku Liu, Jui-Jane Chang,