The derivation of the risk neutral probabilities in a binary tree, in the presence of uncertainty on the underlying asset moves, boils down to the solution of dual fuzzy linear systems. The issue has previously been addressed and different solutions to the dual systems have been found. The aim of this paper is to apply a methodology which leads to a unique solution for the dual systems.
Fuzzy binary tree model for European style vanilla options / Muzzioli, Silvia; H., Reynaerts. - STAMPA. - 1:(2004), pp. 222-229. (Intervento presentato al convegno International Conference on Fuzzy Sets and Soft Computing in Economics and Finance (FSSCEF2004) tenutosi a S. Petersburg (Russia) nel 17-20 Giugno 2004).
Fuzzy binary tree model for European style vanilla options
MUZZIOLI, Silvia;
2004
Abstract
The derivation of the risk neutral probabilities in a binary tree, in the presence of uncertainty on the underlying asset moves, boils down to the solution of dual fuzzy linear systems. The issue has previously been addressed and different solutions to the dual systems have been found. The aim of this paper is to apply a methodology which leads to a unique solution for the dual systems.
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