Option pricing under mixed hedging strategy in time-changed mixed fractional Brownian model

Abstract

In this paper, we obtain a mixed hedging strategy and a pricing formula in a discrete time setting for a European call option in the time-changed mixed fractional Brownian model. In this manner, we generalize the mixed hedging and the pricing formula in Brownian motion to the time-changed mixed fractional Brownian motion. Finally, through some numerical experiments and empirical analysis, we show that our mixed hedging is better than delta hedging on the hedging error ratio in some cases.