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Pricing European Call Currency option based on Adaptive Fuzzy Numbers with Possibilistic Mean

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Author(s): Xing Yu | Hongguo Sun | Guohua Chen

Journal: Progress in Applied Mathematics
ISSN 1925-251X

Volume: 1;
Issue: 2;
Start page: 77;
Date: 2011;
Original page

Keywords: Currency Option | Option Pricing | Possibilistic Mean Value | Fuzzy Volatility | G-K Model

ABSTRACT
In this paper we use the fuzzy estimators based on confidence intervals in order to estimate the volatility of currency exchange rate having sample data. We model the uncertainty of the characteristics such as interest rates and volatility using adaptive fuzzy numbers and replace the fuzzy currency option price and the fuzzy volatility by the possibilistic mean value. Furthermore, a numerical example is presented, and we get the expected prices which depend on given degree of confidence. Key words: Currency Option; Option Pricing; Possibilistic Mean Value; Fuzzy Volatility; G-K Model
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