Option pricing with simulation of fuzzy stochastic variables

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dc.contributor.author Holčapek, Michal
dc.contributor.author Tichý, Tomáš
dc.contributor.other Ekonomická fakulta cs
dc.date.accessioned 2014-05-22
dc.date.available 2014-05-22
dc.date.issued 2013-08
dc.identifier.isbn 978-80-7372-953-0
dc.identifier.uri https://dspace.tul.cz/handle/15240/6915
dc.description.abstract During last decades the stochastic simulation approach, both via MC and QMC has been vastly applied and subsequently analyzed in almost all branches of science. Very nice applications can be found in areas that rely on modeling via stochastic processes, such as finance. However, since financial quantities as opposed to natural processes depend on human activity, their modeling is often very challenging. Many scholars therefor suggest to specify some parts of financial models by means of fuzzy set theory. Many financial problems, such as pricing and hedging of specific financial derivatives, are too complex to be solved analytically even in a crisp case, it can be efficient to apply (Quasi) Monte Carlo simulation. In this contribution a recent knowledge of fuzzy numbers and their approximation is utilized in order to suggest fuzzy-MC simulation to option price modeling in terms of fuzzy-random variables. In particular, we suggest three distinct fuzzy-random processes as an alternative to a standard crisp model. Application possibilities are shown on illustrative examples assuming a plain vanilla European put option under Brownian motion with fuzzy parameter (volatility), Brownian motion with fuzzy subordinator and Brownian motion with fuzzyfied subordinator. In each case the model result into a whole set of prices – thus, since we assume one of the input data as LU fuzzy number, we get the price in terms of the LU fuzzy number as well. The payoff function of analyzed put option can be obviously replaced by more complex payoff structure. en
dc.format text
dc.format.extent 201-211 cs
dc.language.iso en
dc.publisher Technická Univerzita v Liberci cs
dc.publisher Technical university of Liberec, Czech Republic en
dc.relation.ispartofseries Liberec economic forum 2013: proceedings of the 11th international conference: 16th - 17th September 2013, Sychrov, Czech republic, EU /[editor Aleš Kocourek];1
dc.subject random variable en
dc.subject fuzzy variable en
dc.subject option en
dc.subject simulation en
dc.subject.classification C46
dc.subject.classification E37
dc.subject.classification G17
dc.subject.classification G24
dc.title Option pricing with simulation of fuzzy stochastic variables cs
dc.type Article en
dc.publisher.abbreviation TUL
local.faculty Faculty of Economics
local.access open
local.fulltext yes

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