TITLE:
Pricing Study on Two Kinds of Power Options in Jump-Diffusion Models with Fractional Brownian Motion and Stochastic Rate
AUTHORS:
Jin Li, Kaili Xiang, Chuanyi Luo
KEYWORDS:
Stochastic Rate, Fractional Jump-Diffusion Process, Fractional Brown Motion, Power Option
JOURNAL NAME:
Applied Mathematics,
Vol.5 No.16,
August
29,
2014
ABSTRACT: In this paper,
under the assumption that the exchange rate follows the extended Vasicek model,
the pricing of the reset option in FBM model is investigated. Some interesting
themes such as closed-form formulas for the reset option with a single reset date
and the phenomena of delta of the reset jumps existing in the reset option
during the reset date are discussed. The closed-form formulae of pricing for
two kinds of power options are derived in the end.