Fuzzy Option Pricing Based on Fuzzy Number Binary Tree Model

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Abstract
In this article, a new method of option pricing in the form of fuzzy number is established based on fuzzy number binary tree model. Firstly,by using the operation rules of fuzzy number addition and number multiplication in cut set form, the fuzzy number binary tree model is equivalently transformed into two families of classical binary tree models which change with the level value, and some properties of the two binary tree model families are obtained, which are related to solve the problem of fuzzy option pricing. Then, based on the results obtained by us, the concepts of fuzzy set option price and fuzzy number option price are defined, and a sufficient condition is obtained for fuzzy set option price to be fuzzy number option price in the fuzzy number binary tree model. And then, for the convenience of practical application, the concepts of fold line fuzzy set and fuzzy number option price are introduced, a sufficient condition for fold line fuzzy set option price to be fold line fuzzy number option price is obtained, and a specific solution method of the fold line set and the fold line fuzzy number option pricing are set up. At last, two specific examples are given to show how to solve the fold line set and the fold line fuzzy number option price.
Funding Information
  • National Natural Science Foundation of China (61771174, U1934221)

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