The valuation of currency options by fractional Brownian motion

Foad Shokrollahi; Adem Kılıçman

doi:10.1186/s40064-016-2784-2

The valuation of currency options by fractional Brownian motion

Springerplus. 2016 Jul 21;5(1):1145. doi: 10.1186/s40064-016-2784-2. eCollection 2016.

Authors

Foad Shokrollahi¹, Adem Kılıçman²

Affiliations

¹ Department of Mathematics and Statistics, University of Vaasa, 65101 Vaasa, Finland.
² Department of Mathematics, University Putra Malaysia (UPM), 43300 Serdang, Selangor Malaysia.

Abstract

This research aims to investigate a model for pricing of currency options in which value governed by the fractional Brownian motion model (FBM). The fractional partial differential equation and some Greeks are also obtained. In addition, some properties of our pricing formula and simulation studies are presented, which demonstrate that the FBM model is easy to use.

Keywords: Black–Scholes model; Currency option; Fractional Brownian motion; Option pricing.