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M. Melnikov, Y. A. Melnikov; Construction of Green’s function for the Black-Scholes equation, Electronic Journal of Differential Equations, Vol. 2007(2007), No. 153, Pp. 1-14.

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Article

Fractional Black Scholes Option Pricing with Stochastic Arbitrage Return

1Department of Mathematics, Michael Okpara University of Agriculture, Umudike

2Department of Mathematics/Statistics, Federal Polytechnic, Nekede, Owerri


International Journal of Partial Differential Equations and Applications. 2016, Vol. 4 No. 2, 20-24
DOI: 10.12691/ijpdea-4-2-1
Copyright © 2016 Science and Education Publishing

Cite this paper:
Bright O. Osu, Chukwunezu A. Ifeoma. Fractional Black Scholes Option Pricing with Stochastic Arbitrage Return. International Journal of Partial Differential Equations and Applications. 2016; 4(2):20-24. doi: 10.12691/ijpdea-4-2-1.

Correspondence to: Bright  O. Osu, Department of Mathematics, Michael Okpara University of Agriculture, Umudike. Email: megaobrai@hotmail.com

Abstract

Option price and random arbitrage returns change on different time scales allow the development of an asymptotic pricing theory involving the options rather than exact prices. The role that random arbitrage opportunities play in pricing financial derivatives can be determined. In this paper, we construct Green’s functions for terminal boundary value problems of the fractional Black-Scholes equation. We follow further an approach suggested in literature and focus on the pricing bands for options that account for random arbitrage opportunities and got similar result for the fractional Black- Scholes option pricing.

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