Weighted Local Time for Fractional Brownian Motion and Applications to Finance.

Hu, Yaozhong; Øksendal, Bernt; Salopek, Donna Mary
Research report
View/Open
Year
2001
Permanent link
http://urn.nb.no/URN:NBN:no-24283

Is part of
Preprint series. Pure mathematics
Metadata
Show metadata
Appears in the following Collection
Abstract
A Meyer-Tanaka formula involving weighted local time is derived for fractional Brownian motion and geometric fractional Brownian motion. The formula is applied to the study of the stop-loss-start-gain (SLSG) portfolio in a fractional Black-Scholes market. As a consequence, we obtain a fractional version of the Carr-Jarrow decomposition of the European call and put option prices into their intrinsic and time values.