Title: An option pricing model with adaptive interval-valued fuzzy numbers

Authors: Qiansheng Zhang; Jingfa Liu; Haixiang Yao

Addresses: School of Mathematics and Statistics, Guangdong University of Foreign Studies, Guangzhou, 510006, China ' School of Information Sciences and Technology, Guangdong University of Foreign Studies, Guangzhou, 510006, China ' School of Finance, Guangdong University of Foreign Studies, Guangzhou, 510006, China

Abstract: This paper proposes an option pricing model with an interval-valued fuzzy interest rate, volatility, and stock price. The interval-valued fuzzy pattern of the Black-Scholes option formula is also investigated. With the presented option pricing model, the European option price can be evaluated by an adaptive interval-valued fuzzy number (IvFN). Utilising the proposed interval-valued fuzzy option valuation formula, the option investor can pick a European option price with an acceptable interval belief degree for the later transaction.

Keywords: adaptive fuzzy number; interval-valued fuzzy option; European call option; lower fuzzy option; upper fuzzy option; option pricing; possibilistic mean; possibilistic variance; volatility; Black-Scholes formula.

DOI: 10.1504/IJCSM.2023.131626

International Journal of Computing Science and Mathematics, 2023 Vol.17 No.4, pp.371 - 381

Received: 16 Jul 2021
Received in revised form: 16 Apr 2022
Accepted: 26 Apr 2022
Published online: 21 Jun 2023 *

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