応用および計算数学ジャーナル

Symmetry Analysis of Options Pricing with Transactions Costs Driven by Fractional Brownian Noises

Abstract

Nteumagn BF, Pindza E and Eben Mare

We provide a closed-form solution for the European and Asian option pricing models when the source of randomness is a fractional Brownian motion as opposed to the geometric Brownian motion. In addition to the source of randomness, transaction costs are considered to be non-negligible. For the case of the European option, proportional transaction costs hide in the volatility and do not change the form of the model. The construction of the solution is based on the symmetries of the model. The model for Asian options has an additional parameter that makes the volatility time-dependent, which complicates the solution process. However, we are still able to obtain solutions using Lie symmetry methods.