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Pricing Path-Independent Payoffs with Exotic Features in the Fractional Diffusion Model
2020
Fractal and Fractional
We provide several practical formulas for pricing path-independent exotic instruments (log options and log contracts, digital options, gap options, power options with or without capped payoffs ...) in the context of the fractional diffusion model. This model combines a tail parameter governed by the space fractional derivative, and a subordination parameter governed by the time-fractional derivative. The pricing formulas we derive take the form of quickly convergent series of powers of the
doi:10.3390/fractalfract4020016
doaj:7a07133f5c3a4b7985af2c892ba9cc23
fatcat:6p2el7bze5bpdgxldlvfgciqxq