Volatility Estimation and Option Pricing with Fractional Brownian Motion
22 Pages Posted: 6 Nov 2005
Date Written: October 27, 2005
We study the estimation of volatility using the Fractional Brownian Motion (FBM) to model asset returns. Then, we price some European options using a Black-Scholes type formula derived for the FBM market model.
Keywords: Fractional Brownian Motion, Derivative Pricing, Hurst exponent
JEL Classification: C52, G10
Suggested Citation: Suggested Citation