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dc.contributor.authorBjörk, Tomasen_US
dc.contributor.authorHult, Henriken_US
dc.date.accessioned2012-03-28T13:04:01Z-
dc.date.available2012-03-28T13:04:01Z-
dc.date.issued2005en_US
dc.identifier.urihttp://hdl.handle.net/10419/56125-
dc.description.abstractIn 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_US
dc.language.isoengen_US
dc.publisherEkonomiska Forskningsinst. Stockholmen_US
dc.relation.ispartofseriesSSE/EFI Working Paper Series in Economics and Finance 596en_US
dc.subject.jelG10en_US
dc.subject.ddc330en_US
dc.subject.keywordMathematical Financeen_US
dc.subject.keywordFractional Brownian motionen_US
dc.subject.keywordArbitrageen_US
dc.subject.keywordoptionen_US
dc.subject.keywordfinancial derivativesen_US
dc.subject.keywordwicken_US
dc.subject.stwFinanzmathematiken_US
dc.subject.stwBlack-Scholes-Modellen_US
dc.subject.stwArbitrage Pricingen_US
dc.subject.stwStochastischer Prozessen_US
dc.subject.stwTheorieen_US
dc.titleA note on Wick products and the fractional Black-Scholes modelen_US
dc.typeWorking Paperen_US
dc.identifier.ppn500567158en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen_US
Appears in Collections:SSE/EFI Working Paper Series in Economics and Finance, EFI - The Economic Research Institute, Stockholm School of Economics

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