SURVEY ON FRACTIONAL BLACK-SCHOLES WITH HURST EXPONENT ON EUROPEAN OPTION WITH TRANSACTION COST

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Rahmani Morteza; JAFARIAN NAHID

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Paper Information

Journal: FINANCIAL ENGINEERING AND SECURITIES MANAGEMENT (PORTFOLIO MANAGEMENT) Year:2017 | Volume:8 | Issue:32 Page(s): 43-62

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Information Journal Paper

Title

SURVEY ON FRACTIONAL BLACK-SCHOLES WITH HURST EXPONENT ON EUROPEAN OPTION WITH TRANSACTION COST

Author(s)

Rahmani Morteza | JAFARIAN NAHID | Issue Writer Certificate

Keywords

FRACTIONAL BROWNIAN MOTIONQ1

FRACTIONAL BLACK-SCHOLES MODELQ1

HURST EXPONENTQ1

EUROPEAN OPTIONQ1

OPTION VALUTIONQ1

TRANSACTION COSTSQ1

VARIATIONAL ITERATION METHODQ1

Abstract

On all stock exchange of the world famous considerably derivatives are traded. Options are a patent for its owner, the most important are derivatives. The best economic tool management risk, the use of the option contract. It is obvious that at the conclusion of each contract, determining the price is the main element, Thus providing fair prices for securities is very important. In this study, the option pricing under fractional Black-Scholes is survived.The fractional Black-Scholes is based on FRACTIONAL BROWNIAN MOTION with hurst parameter. The HURST EXPONENT be associated with fractal dimension and self-similary as an indicator of long-term memory is used in the process of stock prices. The aim to provide a pricing formula for EUROPEAN OPTIONs with TRANSACTION COSTS is an approximate answer fractional pricing equation with TRANSACTION COSTS by way of VARIATIONAL ITERATION METHOD is checked. The TRANSACTION COSTS contain fixed costs, a cost proportional to the volume traded and a cost proportional to the value traded. Expected, the price of the EUROPEAN OPTION decreases as the HURST EXPONENT increases.To achieve this goal, we estimate (Hurst parameter time series), on the real data to the desired result, the option price reduction reached. Comparing results show that the actual prices by FRACTIONAL BLACK-SCHOLES MODEL, is closer to the actual results.

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APA: Copy

Rahmani, Morteza, & JAFARIAN, NAHID. (2017). SURVEY ON FRACTIONAL BLACK-SCHOLES WITH HURST EXPONENT ON EUROPEAN OPTION WITH TRANSACTION COST. FINANCIAL ENGINEERING AND SECURITIES MANAGEMENT (PORTFOLIO MANAGEMENT), 8(32 ), 43-62. SID. https://sid.ir/paper/197847/en

Vancouver: Copy

Rahmani Morteza, JAFARIAN NAHID. SURVEY ON FRACTIONAL BLACK-SCHOLES WITH HURST EXPONENT ON EUROPEAN OPTION WITH TRANSACTION COST. FINANCIAL ENGINEERING AND SECURITIES MANAGEMENT (PORTFOLIO MANAGEMENT)[Internet]. 2017;8(32 ):43-62. Available from: https://sid.ir/paper/197847/en

IEEE: Copy

Morteza Rahmani, and NAHID JAFARIAN, “SURVEY ON FRACTIONAL BLACK-SCHOLES WITH HURST EXPONENT ON EUROPEAN OPTION WITH TRANSACTION COST,” FINANCIAL ENGINEERING AND SECURITIES MANAGEMENT (PORTFOLIO MANAGEMENT), vol. 8, no. 32 , pp. 43–62, 2017, [Online]. Available: https://sid.ir/paper/197847/en

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