  Volatility clustering, long-range dependence, and non-Gaussian scaling are
stylized facts of financial assets dynamics. They are ignored in the Black &
Scholes framework, but have a relevant impact on the pricing of options written
on financial assets. Using a recent model for market dynamics which adequately
captures the above stylized facts, we derive closed form equations for option
pricing, obtaining the Black & Scholes as a special case. By applying our
pricing equations to a major equity index option dataset, we show that
inclusion of stylized features in financial modeling moves derivative prices
about 30% closer to the market values without the need of calibrating models
parameters on available derivative prices.
