The Case of Imprecisely Stated Volatility: A Fuzzy-Random Approach to Option Pricing
The result's identifiers
Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F61989100%3A27510%2F12%3A86083106" target="_blank" >RIV/61989100:27510/12:86083106 - isvavai.cz</a>
Alternative codes found
RIV/61988987:17610/12:A13017KE
Result on the web
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DOI - Digital Object Identifier
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Alternative languages
Result language
angličtina
Original language name
The Case of Imprecisely Stated Volatility: A Fuzzy-Random Approach to Option Pricing
Original language description
The option pricing model performance crucially depends on the ability to estimate all necessary input parameters successfully. Within the standard models of Black-Scholes type, the most important parameter is volatility. Since it is often very difficultto obtain a single number, an alternative can be to apply interval approach or more generalized fuzzy-random approach. In this paper recent knowledge of fuzzy numbers and their approximations is utilized in order to suggest fuzzy-random simulation approach to option price modeling, ie. we use fuzzy-random variables. In particular, we suggest to replace a crisp volatility parameter in the standard market model (ie. Black-Scholes type) by a fuzzy random variable, which can be easily evaluated by Monte Carlo simulation. Application possibilities are shown on illustrative examples. In particular, we evaluate the model for various input data and option types. The results are compared to the Black-Scholes option price and market option prices
Czech name
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Czech description
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Classification
Type
D - Article in proceedings
CEP classification
AH - Economics
OECD FORD branch
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Result continuities
Project
<a href="/en/project/ED1.1.00%2F02.0070" target="_blank" >ED1.1.00/02.0070: IT4Innovations Centre of Excellence</a><br>
Continuities
P - Projekt vyzkumu a vyvoje financovany z verejnych zdroju (s odkazem do CEP)<br>S - Specificky vyzkum na vysokych skolach
Others
Publication year
2012
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů
Data specific for result type
Article name in the collection
Proceedings of the 13th International Conference on Finance and Banking : 12-13 October 2011, Ostrava, Czech Republic
ISBN
978-80-7248-753-0
ISSN
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e-ISSN
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Number of pages
9
Pages from-to
121-129
Publisher name
Silesian University, School of Business Administration
Place of publication
Karviná
Event location
Ostrava
Event date
Oct 12, 2011
Type of event by nationality
EUR - Evropská akce
UT code for WoS article
000309369700013