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Pricing Study on Two Kinds of Power Options in Jump-Diffusion Models with Fractional Brownian Motion and Stochastic Rate

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DOI: 10.4236/am.2014.516234    2,777 Downloads   3,207 Views Citations

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.

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Li, J. , Xiang, K. and Luo, C. (2014) Pricing Study on Two Kinds of Power Options in Jump-Diffusion Models with Fractional Brownian Motion and Stochastic Rate. Applied Mathematics, 5, 2426-2441. doi: 10.4236/am.2014.516234.

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