R. Jarrow

Option Pricing with Time-Changed Fractional Brownian Motion: A Fractional Variance Gamma Model

Fractional Brownian motion (fBm) exhibits attractive features for financial modeling, including long-range dependence, path roughness, and anomalous diffusion. However, its non-semimartingale nature precludes the use of conventional no-arbitrage approaches to option pricing. We address this limitation by introducing a...