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A Fuzzy-Random Extension of Jamshidian's Bond Option Pricing Model and Compatible One-Factor Term Structure Models

  • Identification data

    Identifier: imarina:9326622
  • Authors:

    de Andrés-Sánchez, J
    Axioms: Mathematical Logic And Mathematical Physics
    10.3390/axioms12070668
    Axioms: Mathematical Logic And Mathematical Physics. 12 (7):
  • Others:

    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: 2024-07-20
    Papper version: info:eu-repo/semantics/publishedVersion
    Licence document URL: http://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
  • Keywords:

    Algebra and Number Theory,Analysis,Geometry and Topology,Logic,Mathematical Physics,Mathematics, Applied
    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
    Mathematics, applied
    Mathematical physics
    Matemática / probabilidade e estatística
    Logic
    Interdisciplinar
    Geometry and topology
    Ciencias sociales
    Astronomia / física
    Analysis
    Algebra and number theory
  • Documents:

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