AN EXAMPLE IN FUZZY OPTIONS PRICING
To make a prediction on the interest rate and prices we only have imprecise data and the interaction between the economic agents and expectations that are not only random but also subjective and vague. It seems adequate and more realistic to consider fuzzy numbers. In this way, one can incorporate the subjectivity inherent in the financial process. Triangular fuzzy numbers are very convenient kind of fuzzy numbers to deal with that imprecision. As an illustration, we present an example in options pricing. We use the fuzzy arithmetic to compute the levels of confidence for an option. This is the discrete version of the classical Black-Scholes formula. In the future we shall consider the fuzzy Black-Scholes formula.
fuzzy logic, option pricing, Black-Scholes formula.