TY  - JOUR
AU  - Sattayatham, P. 
AU  - Intarasit, A. 
PY  - 2011
TI  - An Approximate Formula of European Option for Fractional Stochastic Volatility Jump-Diffusion Model
JF  - Journal of Mathematics and Statistics
VL  - 7
IS  - 3
DO  - 10.3844/jmssp.2011.230.238
UR  - https://thescipub.com/abstract/jmssp.2011.230.238
AB  - Problem statement: We presented option pricing when the stock prices follows a jumpdiffusion
model and their stochastic volatility follows a fractional stochastic volatility model. This
proposed model exhibits the a memory of a stochastic volatility model that is not expressed in the
classical stochastic volatility model. Approach: We introduce an approximated method to fractional
stochastic volatility model perturbed by the fractional Brownian motion. A relationship between
stochastic differential equations and partial differential equations for a bivariate model is presented.
Results: By using an approximate method, we provide the approximate solution of the fractional
stochastic volatility model. And European options are priced by using the risk-neutral valuation.
Conclusion/Recommendations: The formula of European option is calculated by using the technique
base on the characteristic function of an underlying asset which can be expressed in an explicit
formula. A numerical integration technique to simulation fractional stochastic volatility are presented
in this study.