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American Option Pricing in Fuzzy Random Environment

Shuxia Liu, Enfeng Liu, Liming Huang, Zhaohua Chai, YuJing Chang

Abstract



This paper considers the problem of pricing an American put option in fuzzy random environment; Stock price is characterized as the fuzzy random variable. Basic mathematical models of option pricing with fuzziness and randomness are established. The fundamental calculation formulas of American call put and call options with fuzzy random theory are proposed, respectively. We derive the fuzzy random expected value of option. Finally, the validity of this fuzzy random approach to option pricing methodology has been highlighted with an illustrative numerical example.

Keywords


American option, option pricing, fuzzy variable, fuzzy random variables.

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