FEDOTOV, SERGEI; TAN, ABBY - In: International Journal of Theoretical and Applied … 08 (2005) 03, pp. 381-392
The aim of this paper is to present a stochastic model that accounts for the effects of a long-memory in volatility on option pricing. The starting point is the stochastic Black–Scholes equation involving volatility with long-range dependence. We define the stochastic option price as a sum of...