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Fuzzy simulation of European option pricing using mixed fractional Brownian motion

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Abstract

Financial pricing models have great impact on the world of high finance as they enable financial experts to predict the dynamics of underlying asset. Over the last few decades, there has been a lot of competitions among financial researches to establish the most efficient pricing model for different options. This study aims to propose an option valuation model based on mixed fractional Brownian motion and to show how it can efficiently be used as a financial predictive model. In fact, this option evaluation model employs the fuzzy simulation method to estimate a European call option under the condition that the interest rates (domestic and foreign rates) and the volatility are random fuzzy variables. Furthermore, the performance of the proposed model is validated by solving some experimental problems.

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Authors and Affiliations

  1. Faculty of Mathematical Sciences, University of Guilan, Rasht, Iran

    Sara Ghasemalipour

  2. Department of Statistics, Faculty of Mathematical Sciences, University of Guilan, Rasht, Iran

    Behrouz Fathi-Vajargah

Authors
  1. Sara Ghasemalipour
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  2. Behrouz Fathi-Vajargah
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Correspondence to Sara Ghasemalipour.

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Communicated by V. Loia.

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Ghasemalipour, S., Fathi-Vajargah, B. Fuzzy simulation of European option pricing using mixed fractional Brownian motion. Soft Comput 23, 13205–13213 (2019). https://doi.org/10.1007/s00500-019-03862-2

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  • DOI: https://doi.org/10.1007/s00500-019-03862-2

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