Abstract
In this paper we derive a Bismut-Elworthy-Li type formula with respect to strong solutions to singular stochastic differential equations (SDE's) with additive noise given by a multidimensional fractional Brownian motion with Hurst parameter H <1/2. Singular here means that the drift vector field of such equations is allowed to be merely bounded and integrable. As an application we use this representation formula for the study of the δ price sensitivity of financial claims based on a stock price model with stochastic volatility, whose dynamics is described by means of fractional Brownian motion driven SDE's. Our approach for obtaining these results is based on Malliavin calculus and arguments of a recently developed local time variational calculus.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
