Author, as appears in the article.: de Andrés-Sánchez, J
Department: Gestió d'Empreses
URV's Author/s: De Andrés Sànchez, Jorge
Keywords: Vasicek’s model of term structure Vasicek's model of term structure Valuation Uncertainty Statistics Regression Probability–possibility transformation Probability-possibility transformation Methodology Jamshidian’s bond option model Jamshidian's bond option model Insurance Fuzzy-random variables Fuzzy-random option pricing Fuzzy numbers European options Definitions Approximations Alpha-cuts
Abstract: The primary objective of this paper is to expand Jamshidian's bond option formula and compatible one-factor term structure models by incorporating the existence of uncertainty in the parameters governing interest-rate fluctuations. Specifically, we consider imprecision in the parameters related to the speed of reversion, equilibrium short-term interest rate, and volatility. To model this uncertainty, we utilize fuzzy numbers, which, in this context, are interpreted as epistemic fuzzy sets. The second objective of this study is to propose a methodology for estimating these parameters based on historical data. To do so, we use the possibility distribution functions capability to quantify imprecise probability distributions. Furthermore, this paper presents an application to the term structure of fixed-income bonds with the highest credit rating in the Euro area. This empirical application allows for evaluating the effectiveness of the fuzzy extension in fitting the dynamics of interest rates and assessing the suitability of the proposed extension.
Thematic Areas: Mathematics, applied Mathematical physics Matemática / probabilidade e estatística Logic Interdisciplinar Geometry and topology Ciencias sociales Astronomia / física Analysis Algebra and number theory
licence for use: https://creativecommons.org/licenses/by/3.0/es/
Author's mail: jorge.deandres@urv.cat jorge.deandres@urv.cat
Author identifier: 0000-0002-7715-779X 0000-0002-7715-779X
Record's date: 2024-08-03
Papper version: info:eu-repo/semantics/publishedVersion
Licence document URL: https://repositori.urv.cat/ca/proteccio-de-dades/
Papper original source: Axioms: Mathematical Logic And Mathematical Physics. 12 (7):
APA: de Andrés-Sánchez, J (2023). A Fuzzy-Random Extension of Jamshidian's Bond Option Pricing Model and Compatible One-Factor Term Structure Models. Axioms: Mathematical Logic And Mathematical Physics, 12(7), -. DOI: 10.3390/axioms12070668
Article's DOI: 10.3390/axioms12070668
Entity: Universitat Rovira i Virgili
Journal publication year: 2023
Publication Type: Journal Publications