Incorporation of Fuzzy Logic to the Black-Scholes Model in Exchange Option Pricing
Manuel Muñoz Palma, Ezequiel Avilés Ochoa
Manuel Muñoz Palma
Available Online October 2013.
- https://doi.org/10.2991/.2013.10How to use a DOI?
- Financial risk, fuzzy numbers, Black-Scholes model.
- Since the introduction of the uncertainty theory, a new paradigm in economy and finance is formed with the in-corporation of new models that allow a greater degree of accuracy to the reality of the environment of organiza-tions based on the fuzzy logic theory. This article empha-sizes the importance of the uncertainty present in the fi-nancial markets, which has provoked an increasing need of establishing models to determine its effect in pricing, as it is the case of the futures and derivatives markets. A proposal is developed to determine the price of an ex-change option applying triangular fuzzy numbers to ex-change rate variables, and to domestic interest rates, and foreign interest rates based on the classic Black-Scholes (B-S) model.
- Open Access
- This is an open access article distributed under the CC BY-NC license.
Cite this article
TY - CONF AU - Manuel Muñoz Palma AU - Ezequiel Avilés Ochoa PY - 2013/10 DA - 2013/10 TI - Incorporation of Fuzzy Logic to the Black-Scholes Model in Exchange Option Pricing BT - Fourth International Workshop on Knowledge Discovery, Knowledge Management and Decision Support PB - Atlantis Press SP - 79 EP - 87 SN - 1951-6851 UR - https://doi.org/10.2991/.2013.10 DO - https://doi.org/10.2991/.2013.10 ID - MuñozPalma2013/10 ER -