An uncertain currency model with floating interest rates

Different from the conventional methods of probability theory, this paper discusses the currency option pricing problem within the framework of uncertainty theory. Considering the uncertain factors in the financial market, we propose a new uncertain currency model with floating interest rates based on the assumption that the domestic interest rate, the foreign interest rate and the exchange rate follow uncertain differential equations. After that, we derive the pricing formulas of European and American currency options in the form of inverse uncertainty distribution, and analyze the relationship between them and relevant parameters. At last, four numerical examples will be given to illustrate the pricing formulas.