Pricing European Option in a Mixed Bifractional Brownian Motion with Transaction Costs

Abstract

By using the theory of stochastic integration and the method of partial differential equations, the pricing model of European option in a mixed bifractional Brownian motion with transaction costs is proposed. Moreover, the pricing formulae is obtained in this paper. Finally, the comparative analysis is made with option pricing formulae when the underlying asset prices following fractional Brownian motion and standard Brownian motion.