Option pricing with fractional volatility

Abstract

Based on empirical market data, a stochastic volatility model is proposed with volatility driven by fractional noise. The model is used to obtain a risk-neutrality option pricing formula and an option pricing equation.

17 pages Latex, 2 figures

References in corpus (1)

• A process-reconstruction analysis of market fluctuations

Cited by in corpus (1)

• A data-reconstructed fractional volatility model