Volume 5, Issue 3
Pricing Model for Convertible Bonds: A Mixed Fractional Brownian Motion with Jumps

Jie Miao & Xu Yang

East Asian J. Appl. Math., 5 (2015), pp. 222-237.

Published online: 2018-02

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  • Abstract

A mathematical model to price convertible bonds involving mixed fractional Brownian motion with jumps is presented. We obtain a general pricing formula using the risk neutral pricing principle and quasi-conditional expectation. The sensitivity of the price to changing various parameters is discussed. Theoretical prices from our jump mixed fractional Brownian motion model are compared with the prices predicted by traditional models. An empirical study shows that our new model is more acceptable.

  • Keywords

Mixed fractional Brownian motion, Poisson jump, convertible bond, empirical study.

  • AMS Subject Headings

60J75, 60G22, 91G80

  • Copyright

COPYRIGHT: © Global Science Press

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@Article{EAJAM-5-222, author = {}, title = {Pricing Model for Convertible Bonds: A Mixed Fractional Brownian Motion with Jumps}, journal = {East Asian Journal on Applied Mathematics}, year = {2018}, volume = {5}, number = {3}, pages = {222--237}, abstract = {

A mathematical model to price convertible bonds involving mixed fractional Brownian motion with jumps is presented. We obtain a general pricing formula using the risk neutral pricing principle and quasi-conditional expectation. The sensitivity of the price to changing various parameters is discussed. Theoretical prices from our jump mixed fractional Brownian motion model are compared with the prices predicted by traditional models. An empirical study shows that our new model is more acceptable.

}, issn = {2079-7370}, doi = {https://doi.org/10.4208/eajam.221214.240415a}, url = {http://global-sci.org/intro/article_detail/eajam/10799.html} }
TY - JOUR T1 - Pricing Model for Convertible Bonds: A Mixed Fractional Brownian Motion with Jumps JO - East Asian Journal on Applied Mathematics VL - 3 SP - 222 EP - 237 PY - 2018 DA - 2018/02 SN - 5 DO - http://doi.org/10.4208/eajam.221214.240415a UR - https://global-sci.org/intro/article_detail/eajam/10799.html KW - Mixed fractional Brownian motion, Poisson jump, convertible bond, empirical study. AB -

A mathematical model to price convertible bonds involving mixed fractional Brownian motion with jumps is presented. We obtain a general pricing formula using the risk neutral pricing principle and quasi-conditional expectation. The sensitivity of the price to changing various parameters is discussed. Theoretical prices from our jump mixed fractional Brownian motion model are compared with the prices predicted by traditional models. An empirical study shows that our new model is more acceptable.

Jie Miao & Xu Yang. (1970). Pricing Model for Convertible Bonds: A Mixed Fractional Brownian Motion with Jumps. East Asian Journal on Applied Mathematics. 5 (3). 222-237. doi:10.4208/eajam.221214.240415a
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