pricing stock options using fuzzy sets

PRICING STOCK OPTIONS USING FUZZY SETS

We use the basic binomial option pricing method but allow someor all the parameters in the model to be uncertain and model this uncertaintyusing fuzzy numbers. We show that with the fuzzy model we can, with areasonably small number of steps, consider almost all possible future stockprices; whereas the crisp model can consider only n + 1 prices after n steps.

ELY , WILLIAM , M . A . Pricing European Stock Options using Stochastic and Fuzzy

Twitter volume spikes and stock options pricing

The stock market is a popular topic in Twitter. The number of tweets concerning a stock varies over days, and sometimes exhibits a significant spike. In this paper, we investigate the relationship between Twitter volume spikes and stock options pricing. We start with the underlying assumption of the Black–Scholes model, the most widely used model for stock options pricing, and investigate when ...

Analytic Pricing of Employee Stock Options∗†

We introduce a model that captures the main properties that characterize employee stock options (ESO), in particular, the likelihood of early voluntary exercise and the obligation to exercise immediately if the employee leaves the firm, except if this happens before options are vested, in which case the options are forfeited. We derive an analytic formula for the price of the ESO and analyze it...

Option Pricing with Stochastic Volatility Using Fuzzy Sets Theory

The aim of this paper is to price European options for underlying assets with stochastic volatility (SV) in Heston model in 1993 using fuzzy set theory. The main idea is to transform the probability distribution of stochastic volatility to its possibility distribution (from ‘volatility smile to volatility frown’) and reduce the problem to a fuzzy stochastic process for underlying asset with a n...

Pricing Options Using Implied Trees:

Previously, few, if any, comparative tests of performance of Jackwerth’s (1997) generalized binomial tree (GBT) and Derman and Kani (1994) implied volatility tree (IVT) models were done. In this paper, we propose five different weight functions in GBT and test them empirically compared to both the Black-Scholes model and IVT. We use the daily settlement prices of FTSE-100 index options from Jan...