A proof for French's empirical formula on option pricing.
type: Item
instance of: scholarly article
title: A proof for French's empirical formula on option pricing.
zbMATH Open document ID: 1050.91049
DOI: 10.1016/S0960-0779(00)00211-3
author: Xiao-Tian Wang
author: Jin-Rong Liang
author: Fuyao Ren
published in: Chaos, Solitons and Fractals
publication date: 2002-06-13T00:00:00Z
review text: The French formula for option pricing of the title is a variation of the standard Black-Scholes formula where the discounts consider calendar time while the volatility ingredients use trading time. Trading time is calendar time with the weekends and holidays removed. This variation of the standard Black-Scholes formula is obtained by applying the Black-Scholes theory with deterministic interest rate and volatility; the volatility to be used is a fixed value for weekdays and zero for weekends. In this note the authors use fractional Brownian motion to model the evolution of the market and derive this variation of the Black-Scholes formula.
reviewed by: J. L. Fernández
Mathematics Subject Classification ID: 91G10
zbMATH DE Number: 1755344
zbMATH Keywords: financial mathematics
zbMATH Keywords: Black-Scholes formula
zbMATH Keywords: calendar time
zbMATH Keywords: trading time
MaRDI profile type: Publication
cites work: The pricing of options and corporate liabilities
cites work: FRACTAL GEOMETRY OF FINANCIAL TIME SERIES
cites work: Large deviation and self-similarity analysis of graphs: DAX stock prices
cites work: Fractal market hypothesis and two power-laws
cites work: Q4165953
cites work: Q4078873
full work available at URL: s0960-0779(00)00211-3
OpenAlex ID: W2010004170
description: scientific article; zbMATH DE number 1755344