Incorporation of Fuzzy Logic to the Black-Scholes Model in Exchange Option Pricing

DOI

10.2991/.2013.10How to use a DOI?

Keywords

Financial risk, fuzzy numbers, Black-Scholes model.

Abstract

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.

Copyright

© 2013, the Authors. Published by Atlantis Press.

Open Access

This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).

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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  - Proceedings of the 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  - 10.2991/.2013.10
ID  - MuñozPalma2013/10
ER  -