Robust option replication for a Black-Scholes model extended with nondeterministic trends (Q1307618)

The authors propose an extension of the Black and Scholes model by adding a null variation process \(Z\) to the stochastic equation describing the evolution of stock prices. This model could explain long range dependence behavior of the prices; moreover the partial differential equation involved in the calculus of the Black-Scholes price of a European option is not modified by the addition of \(Z\), therefore this price does not depend on \(Z\). Arbitrage opportunities are studied.