Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/298577 
Year of Publication: 
2024
Series/Report no.: 
Working Paper No. 1/2024
Publisher: 
Örebro University School of Business, Örebro
Abstract: 
The paper focuses on the option price subdiffusive model under the unusual behavior of the market, when the price may not be changed for some time which is quite a common situation in the modern financial markets or during global crises. In the model, the risk-free bond motion and classical GBM are time-changed by an inverted inverse Gaussian (IG) subordinator. We explore the correlation structure of the subdiffusive GBM stock returns process, discuss option pricing techniques based on the fractal Dupire equation, and demonstrate how it applies in the case of the IG subordinator.
Subjects: 
Option pricing
Subdiffusion models
Subordinator
Inversesubordinator
Time-changed process
Hitting time
JEL: 
C02
C53
G12
Document Type: 
Working Paper

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