Credit Derivatives Pricing Model for Fuzzy Financial Market

Abstract EN

With various categories of fuzziness in the market, the factors that influence credit derivatives pricing include not only the characteristic of randomness but also nonrandom fuzziness.

Thus, it is necessary to bring fuzziness into the process of credit derivatives pricing.

Based on fuzzy process theory, this paper first brings fuzziness into credit derivatives pricing, discusses some pricing formulas of credit derivatives, and puts forward a One-Factor Fuzzy Copula function which builds a foundation for portfolio credit products pricing.

Some numerical calculating samples are presented as well.