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Research Article | Open Access

Pricing equity warrants under the sub-mixed fractional Brownian motion regime with stochastic interest rate

Xinyi Wang1, Jingshen Wang2, Zhidong Guo2( )
School of Mathematics, Nantong Institute of Technology, Nantong 226002, China
School of Mathematics and Physics, Anqing Normal University, Anqing 246133, China
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Abstract

This paper proposes a pricing model for equity warrants under the sub-mixed fractional Brownian motion regime with the interest rate following the Merton short rate model. By using the delta hedging strategy, the corresponding partial differential equations for equity warrants are obtained. Moreover, the explicit pricing formula for equity warrants and some numerical results are given.

Keywords

option pricingequity warrantssub-mixed fractional Brownian motionMerton short rate model
CLC number: 58J35, 60H10, 91B26

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AIMS Mathematics
Volume 7 Issue 9,
September 2022
Pages 16612-16631
DOI: 10.3934/math.2022910

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Cite this article:
Wang X, Wang J, Guo Z. Pricing equity warrants under the sub-mixed fractional Brownian motion regime with stochastic interest rate. AIMS Mathematics, 2022, 7(9): 16612-16631. https://doi.org/10.3934/math.2022910

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Received: 25 March 2022
Revised: 01 July 2022
Accepted: 04 July 2022
Published: 15 September 2022
©2022 the Author(s), licensee AIMS Press.

This is an open access article distributed under the terms of the Creative Commons Attribution License (https://creativecommons.org/licenses/by/4.0)