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Compound Option Pricing under Fuzzy Environment
Joint Authors
He, Jianmin
Li, Shouwei
Wang, Xiandong
Source
Journal of Applied Mathematics
Issue
Vol. 2014, Issue 2014 (31 Dec. 2014), pp.1-9, 9 p.
Publisher
Hindawi Publishing Corporation
Publication Date
2014-03-05
Country of Publication
Egypt
No. of Pages
9
Main Subjects
Abstract EN
Considering the uncertainty of a financial market includes two aspects: risk and vagueness; in this paper, fuzzy sets theory is applied to model the imprecise input parameters (interest rate and volatility).
We present the fuzzy price of compound option by fuzzing the interest and volatility in Geske’s compound option pricing formula.
For each α, the α-level set of fuzzy prices is obtained according to the fuzzy arithmetics and the definition of fuzzy-valued function.
We apply a defuzzification method based on crisp possibilistic mean values of the fuzzy interest rate and fuzzy volatility to obtain the crisp possibilistic mean value of compound option price.
Finally, we present a numerical analysis to illustrate the compound option pricing under fuzzy environment.
American Psychological Association (APA)
Wang, Xiandong& He, Jianmin& Li, Shouwei. 2014. Compound Option Pricing under Fuzzy Environment. Journal of Applied Mathematics،Vol. 2014, no. 2014, pp.1-9.
https://search.emarefa.net/detail/BIM-505377
Modern Language Association (MLA)
Wang, Xiandong…[et al.]. Compound Option Pricing under Fuzzy Environment. Journal of Applied Mathematics No. 2014 (2014), pp.1-9.
https://search.emarefa.net/detail/BIM-505377
American Medical Association (AMA)
Wang, Xiandong& He, Jianmin& Li, Shouwei. Compound Option Pricing under Fuzzy Environment. Journal of Applied Mathematics. 2014. Vol. 2014, no. 2014, pp.1-9.
https://search.emarefa.net/detail/BIM-505377
Data Type
Journal Articles
Language
English
Notes
Includes bibliographical references
Record ID
BIM-505377