Alhagyan, Mohammed and Misiran, Masnita and Omar, Zurni (2016) Geometric fractional Brownian motion perturbed by fractional Ornstein-Uhlenbeck process and application on KLCI option pricing. Open Access Library Journal, 03 (08). pp. 1-12. ISSN 2333-9721

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Abstract

This paper presents an enhanced model of geometric fractional Brownian motion where its volatility is assumed to be stochastic volatility model that obeys fractional Ornstein-Uhlenbeck process.The method of estimation for all parameters (α, β, m, μ, H1, and H2) in this model is derived.We calculated the value of European call option using the estimates based on the methods of Masnita [1] [2] and Kukush [3], traditional Black-Scholes European option price, in addition to proposed model in order to make comparison study.

Item Type:	Article
Uncontrolled Keywords:	Geometric Fractional Brownian Motion, Fractional Ornstein-Uhlenbeck Process, Long Memory Stochastic Volatility, Innovation Algorithm, Constraint Transcription Method, Segmentation, Option Pricing, KLCI
Subjects:	Q Science > QA Mathematics > QA75 Electronic computers. Computer science
Divisions:	School of Quantitative Sciences
Depositing User:	Dr. Masnita Misiran @ Bakun
Date Deposited:	15 Dec 2016 04:40
Last Modified:	15 Dec 2016 04:40
URI:	https://repo.uum.edu.my/id/eprint/20350

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