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Pricing Study on Two Kinds of Power Options in Jump-Diffusion Models with Fractional Brownian Motion and Stochastic Rate
School of Economic Mathematics, Southwestern University of Finance and Economics, Chengdu, China
School of Economic Mathematics, Southwestern University of Finance and Economics, Chengdu, China
School of Economic Mathematics, Southwestern University of Finance and Economics, Chengdu, China
- 1 School of Economic Mathematics, Southwestern University of Finance and Economics, Chengdu, China
- 2 School of Economic Mathematics, Southwestern University of Finance and Economics, Chengdu, China
- 3 School of Economic Mathematics, Southwestern University of Finance and Economics, Chengdu, China
Applied Mathematics·Volume 05 (2014)·Pages 2426–2441·Published 29 August 2014·DOI10.4236/am.2014.516234
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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.
KeywordsStochastic RateFractional Jump-Diffusion ProcessFractional Brown MotionPower Option
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