Option valuation model with adaptive fuzzy numbers

✍ Scribed by K. Thiagarajah; S.S. Appadoo; A. Thavaneswaran

• Publisher: Elsevier Science
• Year: 2007
• Tongue: English
• Weight: 336 KB
• Volume: 53
• Category: Article
• ISSN: 0898-1221
• DOI: 10.1016/j.camwa.2007.01.011

✦ Synopsis

In this paper, we consider moment properties for a class of quadratic adaptive fuzzy numbers defined in Dubois and Prade [D. Dubois, H. Prade, Fuzzy Sets and Systems: Theory and Applications, Academic Press, New York, 1980]. The corresponding moments of Trapezoidal Fuzzy Numbers (Tr.F.N's) and Triangular Fuzzy Numbers (T.F.N's) turn out to be special cases of the adaptive fuzzy number [S. Bodjanova, Median value and median interval of a fuzzy number, Information Sciences 172 (2005) 73-89]. A numerical example is presented based on the Black-Scholes option pricing formula with quadratic adaptive fuzzy numbers for the characteristics such as volatility parameter, interest rate and stock price. Our approach hinges on a characterization of imprecision by means of fuzzy set theory.