research-article

Option Pricing Based on Binary Tree Model with Discrete Fuzzy Number Factors

Authors:

Qianqian Mao,

Guixiang WangAuthors Info & Claims

ICAIIS 2021: 2021 2nd International Conference on Artificial Intelligence and Information Systems

Article No.: 372, Pages 1 - 5

https://doi.org/10.1145/3469213.3472791

Published: 18 August 2021 Publication History

Get Access

Abstract

In this paper, the problem of European call option pricing is studied based on binary tree model in which the rising and falling factors are fuzzy numbers. We transform the binary tree model – DFN-BT-Model with discrete fuzzy number rising and falling factors into a classical multi-tree model. A calculation formula is given to solve the option pricing in real number form based on the classical multi-ary tree model. An example is given to demonstrate the application of the proposed method.

References

[1]

Cox, J., Ross, S., Rubinstein, M.: Option pricing: A simplified approach.J. Journal of Financial Economics. 7, 229-263, 1979.

Crossref

Google Scholar

[2]

Harrison, J M., Pliska, S R.: Martingales and stochastic integrals in the theory of continuous trading. J. Stochastic processes and their applications. 11, 215-260, 1981.

Google Scholar

[3]

J.A. Yan: Introduction to Martingal Methods in Option Pricing, City University of Hong Kong, Hong Kong, 1998.

Google Scholar

[4]

C.F. Lee, H.Y. Chen, J. Lee: The Binomial, Multinomial Distributions, and Option Pricing Model,Financial Econometrics, Mathematics and Statistics, 368-369, 2019.

Google Scholar

[5]

Hsien-ChungWu: Pricing European options based on the fuzzy pattern of BlackCScholes formula,Computers & Operations ResearchVolume 31, Issue 7, 1069-1081, 2004.

Digital Library

Google Scholar

[6]

Muzzioli, S., Reynaerts, H.: American option pricing with imprecise risk- neutral probabilities. J. International Journal of Approximate Reasoning. 49, 140-147, 2008.

Digital Library

Google Scholar

[7]

Thavaneswaran, A., Appadoo, S.S., Frank, J.: Binary option pricing using fuzzy numbers. J. Applied Mathematics Letters. 26, 65-72, 2013.

Crossref

Google Scholar

[8]

Andrs-Snchez, J.: Pricing European options with triangular fuzzy parameters: Assessing alternative triangular approximations in the Spanish stock option market. J. International Journal of Fuzzy Systems. 20, 1624- 1643, 2018.

Crossref

Google Scholar

[9]

W.G. Zhang, Z. Li, Y.J. Liu, Y. Zhang: Pricing European Option Under Fuzzy Mixed Fractional Brownian Motion Model with Jumps, Computational Economics, Springer, 2020.

Google Scholar

[10]

W. Voxman, Canonical representations of discrete fuzzy numbers, Fuzzy Sets and Systems, vol. 118, pp. 457-466, 2001.

Digital Library

Google Scholar

[11]

G. Wang, C.Zhao, Representation and Operations of Discrete Fuzzy Numbers, Southeast Asian Bulletin of Mathematics (2004) 28: 1003C1010.

Google Scholar

[12]

G. Wang, Y. Xu, S. Qin, Basic Fuzzy Event Space and Probability Distribution of Probability Fuzzy Space, mathematics, Mathematics 2019, 7, 542;

Crossref

Google Scholar

Recommendations

An option pricing model with adaptive interval-valued fuzzy numbers

This paper proposes an option pricing model with an interval-valued fuzzy interest rate, volatility, and stock price. The interval-valued fuzzy pattern of the Black-Scholes option formula is also investigated. With the presented option pricing model, the ...
European option pricing under fuzzy environments

The application of fuzzy sets theory to the Black–Scholes formula is proposed in this article. Owing to the vague fluctuation of financial markets from time to time, the risk-free interest rate, volatility, and the price of underlying assets may occur ...
European Option Pricing Under Fuzzy CEV Model
Abstract
In modern financial market, option is a very effective tool to hedge the risks brought by various uncertainties in real society. Therefore, it is of great significance to select an appropriate stock model to price options. To this aim, the paper ...

Comments

Information & Contributors

Information

Published In

ICAIIS 2021: 2021 2nd International Conference on Artificial Intelligence and Information Systems

May 2021

2053 pages

ISBN:9781450390200

DOI:10.1145/3469213

Permission to make digital or hard copies of all or part of this work for personal or classroom use is granted without fee provided that copies are not made or distributed for profit or commercial advantage and that copies bear this notice and the full citation on the first page. Copyrights for components of this work owned by others than ACM must be honored. Abstracting with credit is permitted. To copy otherwise, or republish, to post on servers or to redistribute to lists, requires prior specific permission and/or a fee. Request permissions from [email protected]

Publisher

Association for Computing Machinery

New York, NY, United States

Publication History

Published: 18 August 2021

Permissions

Request permissions for this article.

Request Permissions

Check for updates

Qualifiers

Research-article
Research
Refereed limited

Conference

ICAIIS 2021

ICAIIS 2021: 2021 2nd International Conference on Artificial Intelligence and Information Systems

May 28 - 30, 2021

Chongqing, China

Contributors

Other Metrics

View Article Metrics

Bibliometrics & Citations

Bibliometrics

Article Metrics

0
Total Citations
39
Total Downloads

Downloads (Last 12 months)5
Downloads (Last 6 weeks)0

Reflects downloads up to 24 Jan 2025

Other Metrics

View Author Metrics

Citations

View Options

Login options

Check if you have access through your login credentials or your institution to get full access on this article.

Full Access

Get this Publication

View options

PDF

View or Download as a PDF file.

PDF

eReader

View online with eReader.

eReader

HTML Format

View this article in HTML Format.

HTML Format

Abstract

References

Recommendations

An option pricing model with adaptive interval-valued fuzzy numbers

European option pricing under fuzzy environments

European Option Pricing Under Fuzzy CEV Model

Comments

Information

Published In

Publisher

Publication History

Permissions

Check for updates

Qualifiers

Conference

Contributors

Other Metrics

Bibliometrics

Article Metrics

Other Metrics

Citations

Login options

Full Access

View options

PDF

eReader

HTML Format

Share

Share this Publication link

Share on social media

Affiliations