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Finance and Credit
 

Risky assets pricing in a fractal market

Vol. 15, Iss. 48, DECEMBER 2009

Available online: 25 December 2009

Subject Heading: The financial market

JEL Classification: 

Markov A.A. Department of Mathematics, post-graduate, Finance Academy under the Government of the Russian Federation
AAAMarkov@gmail.com

Within the framework of the research fractal properties of Russian and American stock markets are investigated. It is shown that the markets being analyzed do not contradict the assumptions of fractal market hypothesis.
     Risky assets are priced using the model based on the discrete approximation of fractional Brownian motion. Proportional transaction costs are brought into the model to exclude arbitrage. Upper and lower bounds of the fair prices for index future options are evaluated by this model.

Keywords: stock index, future option, fractional Brownian motion, arbitrage, proportional transaction costs, Hurst parameter, correlation dimension, non-periodic cycles, persistence, black noise

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ISSN 2311-8709 (Online)
ISSN 2071-4688 (Print)

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