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Model Construction Of Option Pricing Based On Fuzzy Theory, Shang-En Yu, Ming-Yuan Leon Li, Kun-Huang Huarng, Tsung-Hao Chen, Chen-Yuan Chen
Model Construction Of Option Pricing Based On Fuzzy Theory, Shang-En Yu, Ming-Yuan Leon Li, Kun-Huang Huarng, Tsung-Hao Chen, Chen-Yuan Chen
Journal of Marine Science and Technology
Option pricing is a tool that investors often use for the purpose of arbitrage or hedging. However, both the BlackScholes model and the CRR model can only provide a theoretical reference value. The volatility in the CRR model cannot always appear in the precise sense because the financial markets fluctuate from time to time. Hence, the fuzzy volatility is naturally to be considered. The main purpose of this paper is the application of fuzzy sets theory to the CRR model. It is expected that fuzzy volatility, instead of the crisp values conventionally used in the CRR model, can provide reasonable …