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Pricing model for equity warrants in a mixed fractional Brownian environment and its algorithm

Authors
Journal
Physica A Statistical Mechanics and its Applications
0378-4371
Publisher
Elsevier
Publication Date
Volume
391
Issue
24
Identifiers
DOI: 10.1016/j.physa.2012.07.041
Keywords
  • Equity Warrants
  • Mixed Fractional Brownian Motion
  • Fourier Transform
  • Genetic Algorithm
Disciplines
  • Computer Science

Abstract

Abstract This paper deals with the problem of pricing equity warrants in a mixed fractional Brownian environment. Based on the quasi-conditional expectation and the Fourier transform, we present the pricing model for equity warrants. Moreover, a hybrid intelligent algorithm, which is based on the Genetic Algorithm, is employed to solve the nonlinear optimization problem. The performance of our model and the proposed algorithm have been illustrated with some numerical examples.

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