Nielsen, Soren S.; Poulsen, Rolf - Society for Computational Economics - SCE - 2000
This paper provides an extension of the Black-Scholes model for option pricing in which the logarithm of the volatility is assumed to be generated from an Ornstein-Uhlenbeck equation with fractional Riesz-Bessel motion (fRBm) input. The solution of the resulting stochastic differential equation...