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https://hdl.handle.net/10419/56125
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DC Field | Value | Language |
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dc.contributor.author | Björk, Tomas | en |
dc.contributor.author | Hult, Henrik | en |
dc.date.accessioned | 2012-03-28T13:04:01Z | - |
dc.date.available | 2012-03-28T13:04:01Z | - |
dc.date.issued | 2005 | - |
dc.identifier.uri | http://hdl.handle.net/10419/56125 | - |
dc.description.abstract | In some recent papers, such as Elliott & van der Hoek, Hu & Öksendal, a fractional Black-Scholes model have been proposed as an improvement of the classical Black-Scholes model. Common to these fractional Black-Scholes models, is that the driving Brownian motion is replaced by a fractional Brownian motion and that the Ito integral is replaced by the Wick integral, and proofs has been presented that these fractional Black-Scholes models are free of arbitrage. These results on absence of arbitrage complelety contradict a number of earlier results in the literature which prove that the fractional Black-Scholes model (and related models) will in fact admit arbitrage. The object of the present paper is to resolve this contradiction by pointing out that the definition of the self-financing trading strategies and/or the definition of the value of a portfolio used in the above cited papers does not have a reasonable economic interpretation, and thus that the results in these papers are not economically meaningful. In particular we show that in the framework of Elliott and van der Hoek, a naive buy-and-hold strategy does not in general qualify as self-financing. We also show that in Hu and Öksendal, a portfolio consisting of a positive number of shares of a stock with a positive price may, with positive probability, have a negative value. | en |
dc.language.iso | eng | en |
dc.publisher | |aStockholm School of Economics, The Economic Research Institute (EFI) |cStockholm | en |
dc.relation.ispartofseries | |aSSE/EFI Working Paper Series in Economics and Finance |x596 | en |
dc.subject.jel | G10 | en |
dc.subject.ddc | 330 | en |
dc.subject.keyword | Mathematical Finance | en |
dc.subject.keyword | Fractional Brownian motion | en |
dc.subject.keyword | Arbitrage | en |
dc.subject.keyword | option | en |
dc.subject.keyword | financial derivatives | en |
dc.subject.keyword | wick | en |
dc.subject.stw | Finanzmathematik | en |
dc.subject.stw | Black-Scholes-Modell | en |
dc.subject.stw | Arbitrage Pricing | en |
dc.subject.stw | Stochastischer Prozess | en |
dc.subject.stw | Theorie | en |
dc.title | A note on Wick products and the fractional Black-Scholes model | - |
dc.type | Working Paper | en |
dc.identifier.ppn | 500567158 | en |
dc.rights | http://www.econstor.eu/dspace/Nutzungsbedingungen | en |
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