Fractional constant elasticity of variance model

Ngai Hang Chan; Chi Tim Ng

doi:10.1214/074921706000001012

Fractional constant elasticity of variance model

Ngai Hang Chan
, Chi Tim Ng

Research output: Chapters, Conference Papers, Creative and Literary Works › RGC 12 - Chapter in an edited book (Author) › peer-review

Abstract

This paper develops a European option pricing formula for fractional market models. Although there exist option pricing results for a fractional Black-Scholes model, they are established without accounting for stochastic volatility. In this paper, a fractional version of the Constant Elasticity of Variance (CEV) model is developed. European option pricing formula similar to that of the classical CEV model is obtained and a volatility skew pattern is revealed. © 2006, Institute of Mathematical Statistics

Original language	English
Title of host publication	Institute of Mathematical Statistics LECTURE NOTES–MONOGRAPH SERIES
Subtitle of host publication	Time Series and Related Topics In Memory of Ching-Zong Wei
Editors	Hwai-Chung Ho, Ching-Kang Ing, Tze Leung Lai
Publisher	Institute of Mathematical Statistics
Pages	149-164
Volume	52
ISBN (Print)	9780940600683
DOIs	https://doi.org/10.1214/074921706000001012
Publication status	Published - 1 Jan 2006
Externally published	Yes

Bibliographical note

Publication date information for this publication is provided by the author(s) concerned.

Funding

Research supported in part by HKSAR RGC grants 4043/02P and 400305

Research Keywords

Fractional Black-Scholes model
Fractional Brownian motio
Fractional constant elasticity of volatility model
Fractional Ito's lemma
Volatility skew
White noise
Wick calculus

RGC Funding Information

RGC-funded

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10.1214/074921706000001012

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Chan, N. H., & Ng, C. T. (2006). Fractional constant elasticity of variance model. In Hwai-Chung Ho, Ching-Kang Ing, & Tze Leung Lai (Eds.), Institute of Mathematical Statistics LECTURE NOTES–MONOGRAPH SERIES: Time Series and Related Topics In Memory of Ching-Zong Wei (Vol. 52, pp. 149-164). Institute of Mathematical Statistics. https://doi.org/10.1214/074921706000001012

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keywords = "Fractional Black-Scholes model, Fractional Brownian motio, Fractional constant elasticity of volatility model, Fractional Ito's lemma, Volatility skew, White noise, Wick calculus",

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doi = "10.1214/074921706000001012",

language = "English",

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Fractional constant elasticity of variance model. / Chan, Ngai Hang; Ng, Chi Tim.
Institute of Mathematical Statistics LECTURE NOTES–MONOGRAPH SERIES: Time Series and Related Topics In Memory of Ching-Zong Wei. ed. / Hwai-Chung Ho; Ching-Kang Ing; Tze Leung Lai. Vol. 52 Institute of Mathematical Statistics, 2006. p. 149-164.

Research output: Chapters, Conference Papers, Creative and Literary Works › RGC 12 - Chapter in an edited book (Author) › peer-review

TY - CHAP

T1 - Fractional constant elasticity of variance model

AU - Chan, Ngai Hang

AU - Ng, Chi Tim

N1 - Publication date information for this publication is provided by the author(s) concerned.

PY - 2006/1/1

Y1 - 2006/1/1

N2 - This paper develops a European option pricing formula for fractional market models. Although there exist option pricing results for a fractional Black-Scholes model, they are established without accounting for stochastic volatility. In this paper, a fractional version of the Constant Elasticity of Variance (CEV) model is developed. European option pricing formula similar to that of the classical CEV model is obtained and a volatility skew pattern is revealed. © 2006, Institute of Mathematical Statistics

AB - This paper develops a European option pricing formula for fractional market models. Although there exist option pricing results for a fractional Black-Scholes model, they are established without accounting for stochastic volatility. In this paper, a fractional version of the Constant Elasticity of Variance (CEV) model is developed. European option pricing formula similar to that of the classical CEV model is obtained and a volatility skew pattern is revealed. © 2006, Institute of Mathematical Statistics

KW - Fractional Black-Scholes model

KW - Fractional Brownian motio

KW - Fractional constant elasticity of volatility model

KW - Fractional Ito's lemma

KW - Volatility skew

KW - White noise

KW - Wick calculus

U2 - 10.1214/074921706000001012

DO - 10.1214/074921706000001012

M3 - RGC 12 - Chapter in an edited book (Author)

SN - 9780940600683

VL - 52

SP - 149

EP - 164

BT - Institute of Mathematical Statistics LECTURE NOTES–MONOGRAPH SERIES

A2 - Hwai-Chung Ho,

A2 - Ching-Kang Ing,

A2 - Tze Leung Lai,

PB - Institute of Mathematical Statistics

ER -

Fractional constant elasticity of variance model

Abstract

Bibliographical note

Funding

Research Keywords

RGC Funding Information

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