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Axioms 2019, 8(2), 39; https://doi.org/10.3390/axioms8020039

Pricing Compound and Extendible Options under Mixed Fractional Brownian Motion with Jumps

Department of Mathematics and Statistics, University of Vaasa, P.O. Box 700, FIN-65101 Vaasa, Finland
Received: 6 February 2019 / Revised: 22 March 2019 / Accepted: 30 March 2019 / Published: 3 April 2019
PDF [299 KB, uploaded 3 April 2019]
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Abstract

This study deals with the problem of pricing compound options when the underlying asset follows a mixed fractional Brownian motion with jumps. An analytic formula for compound options is derived under the risk neutral measure. Then, these results are applied to value extendible options. Moreover, some special cases of the formula are discussed, and numerical results are provided.
Keywords: pricing; mixed fractional Brownian motion; extendible and compound options; poisson process pricing; mixed fractional Brownian motion; extendible and compound options; poisson process
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited (CC BY 4.0).
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Shokrollahi, F. Pricing Compound and Extendible Options under Mixed Fractional Brownian Motion with Jumps. Axioms 2019, 8, 39.

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