The Fuzzy Binomial Option Pricing Model under Knightian Uncertainty

  title={The Fuzzy Binomial Option Pricing Model under Knightian Uncertainty},
  author={Wenjun Zhang and Liyan Han},
  journal={2009 Sixth International Conference on Fuzzy Systems and Knowledge Discovery},
Taking the Knightian uncertainty of financial market into consideration, the randomness and fuzziness of stock price should been evaluated by both probabilistic expectation and fuzzy expectation. We make use of parabolic type fuzzy numbers to discuss the fuzzy binomial option pricing model with uncertainty of both randomness and fuzziness, and derive expression for the fuzzy risk neutral probabilities, along with fuzzy expression for the fuzzy call prices. As a consequence, we obtain weighted… CONTINUE READING

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