1. Asset Pricing Model Based on Fractional Brownian Motion.
- Author
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Yan, Yu and Wang, Yiming
- Subjects
- *
BROWNIAN motion , *COMPLEX numbers , *REAL numbers , *MERTON Model , *DECISION making - Abstract
This paper introduces one unique price motion process with fractional Brownian motion. We introduce the imaginary number into the agent's subjective probability for the reason of convergence; further, the result similar to Ito Lemma is proved. As an application, this result is applied to Merton's dynamic asset pricing framework. We find that the four order moment of fractional Brownian motion is entered into the agent's decision-making. The decomposition of variance of economic indexes supports the possibility of the complex number in price movement. [ABSTRACT FROM AUTHOR]
- Published
- 2022
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